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Return of the vampire squid

Like a sequel to a bad horror movie, the "great vampire squid" is back.

That was gonzo author Matt Taibbi's description in a mid-2009 Rolling Stone article about Goldman Sachs, the financial giant that played a central role in the 2008 financial meltdown. The world's most powerful investment bank, he wrote, was a "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

Today, that hungry description is beginning to sound a lot like JPMorgan Chase & Co., which, at best, has been swimming in the same troubled waters.

Chairman and CEO Jamie Dimon has come under fire after disclosing "significant" losses estimated at $2 billion in a portfolio of credit investments. Dimon blamed "errors, sloppiness and bad judgment" for the "terrible, egregious mistake."

The disclosure recalled Wall Street's 2008 meltdown and the mammoth financial houses that were bailed out at taxpayers' expense because they were judged as being "too big to fail" without bringing down a sizable portion of the global economy.

The good news about JPMorgan's bad news is this: Its huge size helps it contain its problems and avoid igniting another major meltdown. While $2 billion sounds like a lot of money -- because it is -- it is only a drop in the bucket, compared with JPMorgan's $608 billion in customer deposits. A smaller bank might be wiped out, but JPMorgan can handle it and move on, somewhat chastened, one hopes.

Yet, Dimon makes an inviting target for criticism, partly because he has been one of the most prominent and vociferous opponents of the strong regulation that President Obama and other critics say is necessary to prevent risky bets from causing another disaster.

We have been here before. JPMorgan's error came out of the sort of risky behavior that brought the financial system crashing down four years ago:

Specifically, the loss stemmed from a complex deal involving credit default swaps, insurance-like contracts that essentially allow firms to bet on whether a given asset will rise or fall. In 2010, Congress passed the "Volcker rule," named after Paul Volcker, the former Federal Reserve chairman who proposed it, as part of the Dodd-Frank Act to prevent companies from using their own money to make such bets.

However, the Volcker rule has yet to be implemented. Regulators are still writing the rules. Federal Reserve Chairman Ben Bernanke said recently they may not meet the scheduled July deadline for the rule's implementation.

Besides, Dimon insists that the Volcker rule would not apply to this case because the rule allows hedging, which can most easily be described as a risky investment made to offset the risk of another investment. If so, that's a huge loophole.

Meanwhile, the big banks, led by heavyweights like Dimon, continue to lobby against the rule, even as it is being written.

For now, big banks still appear to be winning their battle against those of us who remain skeptical as to whether any bank should be judged too big to fail. They argue, reasonably enough, that bigness is good in banks that have to deal with big customers and remain competitive in a big global economy.

But in recent years we have seen big financial risk-takers collect big winnings when times were good, and when their bets went belly up, taxpayers paid for their losses. Capitalism should be consistent. Even if you believe some banks should be too big to fail, we're in big trouble if they become too big to regulate.