JPMorgan Chase will spin off a “special investments group” to isolate the Chief Investment Office that created the Fail Whale trades. Basically they are taking the salvageable remains out of the CIO and ring-fencing it, while curtailing the speculative trading that led to the massive losses.

That’s the official story, anyway. We won’t know the truth because the regulators have been kept out of the process in identifying the risk positions at JPMorgan Chase. Even to this day, the investigations of the Fail Whale trades have nothing to do with the systemic risks borne by the Chief Investment Office, but on whether traders disclosed enough to their superiors about the bets when they turned bad, essentially exculpating the superiors for just “getting bad information.” I suppose it’s progress that the CFTC is bothering to use its new powers over credit derivatives to investigate JPMorgan Chase at all, but by this account, it’s an investigation channeled toward the smaller fish in the pond.

Meanwhile, anything dealing with root causes has been taken off the table:

Senate Democratic leaders have shown little appetite for taking on Wall Street before Election Day, despite urging by one of their star recruits, Massachusetts Senate candidate Elizabeth Warren.

Warren has called on Congress to resurrect the 1933 Glass-Steagall Act, which established a firewall between investment banks that traditionally specialized in speculative trades and commercial banks that historically earned money primarily from lending [...]

Senate Democratic leaders have carefully avoided a major confrontation with Wall Street this year, when millions of dollars are already flowing to Republican-allied super-PACs from anonymous donors.

It’s obviously going to take another financial crisis to get us anywhere near the kind of banking system we need. Until then, we now have a fair bit of proof that we are still living in an era of unbridled risk. And if you’re a regulator that’s more concerned about banker’s suspicious activity, well, that’s going to get you fired.

On a happier note, there’s the move of money in Buffalo away from JPMorgan Chase and into a community bank. If government won’t force banks away from being too big to fail, maybe the people can do the job.