I love nostalgia, but in my desire to go back in time, 2008isn't one of the top settings on my wayback machine. Yet theunfolding of the JPMorgan Chase's $2 billion mishap put me right back into thosefun days of the implosion of Lehman Brothers–and the resultantGreat Recession.

It's a story that's still developing, but the gist is that somebad investment decisions involving derivatives gone wild could costJPMorgan—one of the “good guys” of the '08 meltdown—as much as $5billion, depending on who you talk to.

Michael Hiltzik of the Los Angeles Times breaks it down:

JPMorgan's trader, a London-based derivatives expert whoseportfolio was so outsized he became known in the markets as theLondon Whale, essentially bet that corporate debt was becoming lessrisky as corporations were getting stronger—in trading parlance, hewas long corporate debt. But he did so in a way that even a tinyhiccup in the index he was trading could be exploited by rivaltraders. And that's what happened.

Of course, heads rolled over the situation—with the exception ofthe noggin of JPM Chair and CEO Jamie Dimon, who stockholders just rewardedwith a vote of confidence and a $23 million pay package. Not badfor a guy who just cost the company $2 billion (since thetrade is still playing out, some say the loss could be closer to $5billion) and publicly stated of the bank's little math mixup: “Weknow we were sloppy. We know we were stupid. We know there was badjudgment.”

(On the other side of the coin, another bank, Wells Fargo, recently fired a lowly customer service rep forshoplifting – more than 30 years ago. Guess she wasn't stupidor sloppy enough to warrant keeping her job.)

Some pundits say there's little to fear from the singleincident. A $5 billion loss is chump change to a bank the size ofJPM, which reported profits of $19 billion in 2011 and isn't acandidate for any sort of bailout. But others are concerned thatthe current loose language of the Dodd-Frank Act—designed toprevent future financial meltdowns—could permit other banks to playfast and loose with other people's money through portfoliohedging.

The fallout from the JPM “oopsie” remains to be seen. So far,the SEC has launched an investigation, and shareholders have filedthe first lawsuits, accusing the bank and its management ofexcessive risk.

What's truly mind-boggling is that even with more regulation,something like this could happen—a scant 4 years after the eventsthat culminated in a financial disaster we still haven't recoveredfrom.

When the 2008 meltdown hit, many insurance people wererightfully indignant about being painted with the same brush as thebanks and investment firms behind the crash. That issue is stillalive and well today, with insurance companies that own and operatesavings & loans under the microscope (see “InsurersFace New Federal Regulation from Federal Reserve”).

The core of the issue lies with the Volcker Rule, whichprohibits financial firms under FDIC protection from proprietarytrading for their own account. And although the SEC is consideringan exemption for insurers, the issue is far from settled.

Back during that other Depression, Congress passed theGlass-Steagall Act, which erected the firewall between banks andinsurance. The wall came down in 1999 with Gramm-Leach-Bliley,giving banking and insurance free rein to intermingle.

Once upon a time, both banking and insurance were synonymouswith security, stability and strength. For banks, that image hasbeen tarnished by risky schemes like that perpetrated by JPM.

The Armageddon that some in the insurance industry feared frombank/insurance blending may not have come to pass, but evenderegulation's biggest supporters have to admit that the resultinggrowth of complex financial derivatives has been a thorn in theside of the conservative-by-nature insurance industry.