I certainly recognize that the so-called “grilling” of JPMorgan Chase CEO Jamie Dimon today was more like a pillow fight, with more Senators asking Dimon’s opinion on things than trying to get to the bottom of what happened at the Chief Investment Office. I don’t know what people expected. For all intents and purposes, members of the Senate Banking Committee are employees of JPMorgan Chase. Of course Republicans would take a light touch. So would most Democrats. Just be thankful that Mark Warner wasn’t there, you didn’t get to see the real bootlicking.

But that doesn’t mean the hearing wasn’t worthwhile. Dimon basically admitted to Sarbox violations, not that we have an aggressive prosecutor anywhere in the Justice Department willing to take that up. On a more realizable level, Dimon’s comments on the trades themselves, which he called indefensible, and which he said to Jack Reed could have possibly been stopped under the Volcker rule, put pressure on the regulators to reverse their initial decision on broad types of hedging as acceptable trades for depository institutions to make. Jeff Merkley, who had the most spirited exchange of the day, made the case in his reaction to the hearing, taking the optimistic view:

While it wasn’t his intention, Jamie Dimon today made the case for a strong Volcker Rule. I was pleased to hear him say that he doesn’t want to be in the hedge fund business and that these proprietary trades should not have been made. These large gambling losses are exactly why we need a strong loophole-free Volcker firewall that separates traditional banking and hedge-fund style trading. We cannot continue to allow massive proprietary trades disguised as risk management, hedging, or market-making.

I hope that when regulators implement the Volcker Rule in July, Dimon follows through on his statements to Congress today and ensures that JPMorgan’s Chief Investment Office ends the practice of using depositors’ funds for high-risk hedge fund investing.

To make sure this happens, regulators need to finalize strong rules that provide bright, enforceable lines. Banks should be lending to small businesses and families, not making high-risk bets that create systemic risk for our entire economy.

This isn’t even that much of a stretch. Dimon did say his organization wasn’t in the hedge fund business, and he did disclaim any defense of the synthetic derivative part of the CIO portfolio. He said those trades should not have been made, and that they got too complex and complicated. This is the textbook definition of a “too big to manage” situation. Dimon, who by news reports personally approved the trades, could not get CIO to pull out of the positions when they went bad. In fact, as clear by his testimony, they’re still being unwound. This was a money-making part of the business, interested in yields rather than hedging, and it was precisely the kind of speculative bets that should be disallowed for a bank under the law.

If this gives leverage to pressure OCC on the final rule, if Dimon becomes that much more muted in his criticism (he wavered from saying that Volcker is unworkable to saying that it would have found this trade and disallowed it), if we get a stronger rule, in the game of inches that is financial reform – actually any legislative reform – you could see some progress. It’s not nearly enough to fix the banking system, of course. But you need a few less fawning Senators for that.