JPMorgan Loss Proves System Too Complex, China’s Gao Says

http://www.businessweek.com/news/2012-10-05/jpmorgan-loss-proves-system-too-complex-china-s-gao-says

JPMorgan Chase & Co. (JPM)’s $5.8 billion trading loss this year showed that the financial system is getting too complicated for even respected institutions, the president of China’s sovereign-wealth fund said.

“You are creating a system that very few people understand, much less the regulators because the regulators haven’t the incentives like the bankers,” Gao Xiqing, president of China Investment Corp., said today at a lunch hosted by the Economic Club of New York. “As a former regulator I think we do need to slow down a little bit instead of rushing up to all those fancy derivatives."

He expressed concern about a society in which “all the best engineers are engineering financial products.”

“You have all the smartest kids to design these products, the only purpose of which is to get money out of other people’s pockets,” he said. “That is not very good.”