Elizabeth Warren, as everybody knows, is a Harvard Law School professor. She was also the chair of the Congressional Oversight Panel, which oversaw the implementation of TARP, and she was tasked by the Obama administration to set up the Consumer Financial Protection Bureau, a powerful government agency established under the Dodd-Frank Act. Now she’s running for the Senate in Massachusetts, a seat held by Republican Scott Brown. One of the planks in her platform is the reinstatement of the Glass-Steagall Act, a depression-era law partially repealed under Bill Clinton in 1999. With the recent news about a $2 billion loss at JP Morgan Chase, she was on NPR over the weekend saying that Glass-Steagall should be reinstated in order to prevent losses like that.

If you heard that NPR broadcast—and you still can at www.npr.org—you’d have heard Warren say that “the thing about Glass-Steagall is that it makes banking boring… If you want to do all those exciting things like make $100 billion bets or lose $2 billion, or 3, you have to do that over in the Wall Street trading kind of business. Glass-Steagall says there needs to be a wall between those two kinds of activities.”

Well, Warren isn’t a senator yet, and that’s a good thing because she doesn’t have an understanding of Glass-Steagall that we might expect from a Harvard law professor. The first thing she has to understand is that Glass-Steagall still applies to banks. The only thing that changed in 1999 was that banks were allowed to affiliate with securities firms, but Glass-Steagall still forbids banks themselves to engage in underwriting or dealing in securities.

Well, if Glass-Steagall still applies to banks, how is it that JP Morgan Chase could make those trades that cost the bank $2 billion? They can do it because even under Glass-Steagall banks were able to buy and sell (that is, trade) loans and securities backed by loans. How could it be otherwise? Loans are banks’ stock in trade, and it would be as crazy to forbid them from buying and selling loans and securities backed by loans as it would be to prohibit Exxon Mobil from buying and selling oil.

What’s more, JP Morgan Chase’s CEO, Jamie Dimon, says the bank lost the $2 billion in hedging transactions, which means they were making trades to protect other assets against losses. Banks have always been allowed to hedge, not only under Glass-Steagall but also under the Volcker rule that is in the Dodd-Frank Act, which Warren said she supports.

$2 billion is a lot of money, of course, but it’s only 1/1000th of the assets of this $2 trillion bank. Warren fell for the media hype that this was a huge “bet,” and that doesn’t speak well for her ability, as a Harvard law professor, to distinguish between facts and what the media says. She’ll have to do that if she ever gets to be a senator, and maybe before.