In NRO, I write,

When large banks have resources, politicians will be tempted to treat them as piñatas, taking whacks at them in order to extract money to distribute to constituents (see the recent “foreclosure settlement,” or the pressure being placed on Freddie Mac and Fannie Mae to write down principal on loans). When large banks get in trouble, politicians will be tempted to bail them out.

Thus, my reaction to the JP Morgan loss was to see the case for breaking up big banks as reinforced. Some day, perhaps I will write a Dr. Seuss version.

See also Mike Konczal (pointer from Mark Thoma.)