AMY GOODMAN: So let’s go from Occupy to the banks. Let’s turn to JPMorgan Chase. The nation’s largest bank revealed last week it had lost $2 billion in risky derivatives trading. Now we believe it’s $3 billion; just in the last week, they say another billion. This is how President Obama responded to the news during an interview on ABC’s The View.

PRESIDENT BARACK OBAMA: JPMorgan is one of the best-managed banks there is. Jamie Dimon, the head of it, is one of the smartest bankers we’ve got. And they still lost $2 billion and counting, precisely because they were making bets in these derivative markets. We don’t know all the details yet; it’s going to be investigated. But this is why we passed Wall Street reform. This is the best- or one of the best-managed banks. You could have a bank that isn’t as strong, isn’t as profitable, making those same bets, and we might have had to step in. And that’s exactly why Wall Street reform is so important.

AMY GOODMAN: That’s President Obama. Paul Krugman?

PAUL KRUGMAN: Yeah, what I wish he would say—JPMorgan, first of all, how well managed is it, really? We don’t know. Right? Your general rule, if somebody has a great reputation—this applies to me, too—is he’s never as good as you think. But the main thing is, they’re making these bets with your money, because these are banks that are guaranteed. They have guaranteed deposits. We’re supposed to have a rule going into effect, the Volcker Rule, that says that they can’t do this kind of stuff. But they are continuing to do it. Jamie Dimon of JPMorgan has been among the people campaigning most furiously against any restrictions on this, saying, “We know our business. You don’t need to tell us what to do.” Turns out, actually, no, they don’t. And also, banks, when banks fail, they can take the economy down with them. This is why banks, more almost than anything else, need to be regulated. Adam Smith, in The Wealth of Nations, 1776, all about laissez-faire, letting markets rip, but he said we need to regulate banks closely, because he had seen banking crises in Scotland. So, this was an object lesson that, in fact, banking is too important and too crucial to be left up to the bankers.

AMY GOODMAN: Yet, Jamie Dimon was the one who was lobbying heavily against the Volcker Rule.

PAUL KRUGMAN: That’s right. He’s been the pointman.

AMY GOODMAN: And explain further.

PAUL KRUGMAN: So, the Volcker Rule says that if you are a bank that has guaranteed deposits, if you’re an ordinary bank, which JPMorgan Chase is, that you cannot be doing—essentially, you can’t be doing speculating. You can’t be doing proprietary trading. You can’t be speculating in the markets. You can act as a middleman for your customers, but you should not be taking, in effect, those guaranteed deposits, that money, and using it to make speculative bets.

Jamie Dimon, because JPMorgan Chase, whether through smartness or whatever, because they managed to avoid getting caught up in the subprime losses, they’ve said, “We are the” — you know, they’ve become the good bank, the bankers who know, whether that’s true or not. And so, he was leading the charge against these regulations, against—in general, against stronger regulations on banks. And now it turns out that—what do you know? They were doing speculative investments with depositors’ money, and they lost a bunch of it through something we still don’t understand but looks to have been incredibly risky—not enough to bring them down, but enough to show—

AMY GOODMAN: How do you know? I mean, one—another billion in the last week. We’re up to three.

PAUL KRUGMAN: Well, they’re a very big bank, so they—yes, that’s right. If it turns out if it’s—if it doubles and triples again, who knows? It’s certainly taken a big bite of their stock, so it’s not trivial. But the main point is, they have just demonstrated that, no, it’s not—we cannot trust the bankers to play—to use this money safely. We cannot trust them to do these things.

AMY GOODMAN: And Jamie Dimon, who is the head, the CEO and chair of JPMorgan Chase, also sits on the board of the New York Fed.

PAUL KRUGMAN: That’s right, yeah. So they—that’s—

AMY GOODMAN: Federal Reserve.

PAUL KRUGMAN: Which is—he certainly shouldn’t be there. I mean, I think he—

AMY GOODMAN: Explain what this means. He says, “Oh, come on. That’s just an advisory group.”

PAUL KRUGMAN: Yeah, except that the Federal Reserve, it has more—it means more than that. It doesn’t mean that he’s actually making the decisions, but it’s got to exert influence. And remember, the Federal Reserve system is not just managing interest rates, it is also acting as the supervisor of the banking system, it’s acting as a prudential regulator. So if you have the very people who have a stake in basically playing “heads I win, tails you lose” with your money in a position of helping to influence the rules that govern their ability to make those bets, it’s a bad thing. No.

AMY GOODMAN: Do you think Jamie Dimon should resign?

PAUL KRUGMAN: I think—I think, probably, yes. I mean, he’s become—he’s gone in just an instant from being—let’s put it this way. Precisely because he’s been using his supposed wisdom as a way to campaign against reform, and now it’s turned out that he wasn’t that wise after all—in fact, his bank was doing seriously bad stuff—I think it would be better for everybody if he went. It’s not going to happen, but I’d like to see that happen.

AMY GOODMAN: If he left JPMorgan Chase?

PAUL KRUGMAN: Yes, yes.

AMY GOODMAN: Do you think he should be forced to leave the board of the New York Fed?

PAUL KRUGMAN: Yes. That’s an easier one. That’s for sure, because this is—I mean, this is essentially somebody who has been shown to be a bad actor, not—there are worse actors out there, but that’s not much of an excuse.

AMY GOODMAN: Very quickly, Matt Taibbi just wrote about naked short selling, shorting stocks they don’t possess, talking about Goldman Sachs and Merrill. He says—it sounds confusing and, frankly, illegal, but what is it? How common is it? How much more of these shenanigans are going on?

PAUL KRUGMAN: OK. I’m not—I’m not an absolutist on short selling. There’s a lot of things that—there are a lot—markets have got lots of things in it that don’t sound wonderful. The main thing, though, is that institutions that are part of the public trust should not be doing this sort of thing. Goldman Sachs is now a bank. It has federal guarantees behind it. That means they should not—they can’t do this. Anybody who’s a systemically important institution, who is putting a—whose failure could threaten to bring the whole system down, should not be doing this. So, if some guy, some rich person, wants to do some naked short selling, I would say, well, I’m all right, kind of, with that, but not these institutions.

AMY GOODMAN: You say, “Disasters do happen; history is replete with floods and famines, earthquakes and tsunamis. What makes this disaster so terrible — what should make you so angry — is that none of this need be happening. There has been no plague of locusts; we have not lost our technological know-how; America and Europe should be richer, not poorer, than they were five years ago. … We have both the knowledge and the tools to end this suffering.”

PAUL KRUGMAN: That’s right. This is a—this is, economically, a trivial problem we have. Give me—you know, make me dictator—not a good idea, but make—give me the power to do the right things in terms of economic policy, and it would be over in less than two years.

AMY GOODMAN: And the first things you would do?

PAUL KRUGMAN: Increase—reverse those cuts, increase government spending, do infrastructure investment, rehire those schoolteachers, provide mortgage relief for homeowners, get the Federal Reserve to signal clearly that it’s not going to slam on the brakes anytime soon. That would be enough, just like that.

AMY GOODMAN: Could President Obama say this as he runs for re-election and win, do you believe? It sounds like it would satisfy a lot of people.

PAUL KRUGMAN: I think he has to be careful about how he says it, because the American people have been subjected to 40 years of anti-government propaganda. But I think there are ways to say it. I think he needs to say, “We need a job creation agenda. We need to restore the essentials of a good life in America.” And he needs to run against the hostage takers on the Republican side of the aisle.

AMY GOODMAN: We’re talking to Paul Krugman, the Nobel Prize-winning economist, op-ed columnist for the New York Times, has a new book out called End This Depression Now! Back with more of Paul Krugman in a minute.