I may love nostalgia, but in my desire to travel back intime, 2008 isn't one of the top settings on my way-back machine.Yet last month's drama of JPMorgan Chase losing $2 billion put meright back into those fun days of the implosion of LehmanBrothers—and the resultant Great Recession.

In a story that's still developing, a failed hedging strategycould cost JPMorgan—one of the “good guy” banks of the meltdown—asmuch as $5 billion, depending on who you ask.

Of course, heads rolled over the situation—with the exception ofthe noggin of JPM Chair and CEO Jamie Dimon, whom stockholdersrewarded with a vote of confidence and a $23 million pay package.Not bad for a guy who just cost the company billions and publiclystated of the bank's little math mishap: “We know we were sloppy.We know we were stupid. We know there was bad judgment.”

Some observers say there's little to fear from the incident. A$5 billion loss is chump change to JPM, which reported profits of$19 billion in 2011. But others are concerned that the currentlanguage of the Dodd-Frank Act allows banks to play fast and loosewith other people's money through portfolio hedging.

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 “Insurers Face New Federal Regulation from FederalReserve” at propertycasualty360.com).

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 JPM's.

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.