The massive $2 billion loss reported last week by the nation’s largest bank continues to roil Capitol Hill. The loss, by JPMorgan Chase, not only has renewed calls for stricter financial regulation — but now the calls of conflict-of-interest on the part of JPMorgan Chase chief Jamie Dimon are growing louder.
At issue is Dimon’s dual role at the Federal Reserve. Democrat Elizabeth Warren, a candidate for Senate from Massachusetts and a former Obama administration financial consumer advocate, first called on Dimon to resign his post at the Fed.
Now the issue has jumped from the campaign trail to the Senate floor, where Sen. Bernie Sanders (I-Vt.) says he is readying new legislation.
“It is an obvious conflict of interest for Jamie Dimon, the CEO of the largest bank in America, to serve on the New York Fed’s board of directors,” Sanders says. “The New York Fed is in charge of both regulating JPMorgan Chase and deciding whether or not to provide billions of dollars in virtually zero-interest loans to this too-big-to-fail institution if it needs another bailout. This is a clear example of the fox guarding the henhouse.
“I am working on legislation to reform the Federal Reserve that would end this conflict of interest. No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed’s board of directors or be employed by the Fed,” Sanders adds.
Sanders says that Government Accountability Office audits found that:
- Dimon served on the board of the Federal Reserve Bank of New York at the same time that his bank received over $390 billion in total emergency loans from the Fed.
- Dimon convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JPMorgan Chase acquired this troubled investment bank.
- JPMorgan Chase was used by the Fed as a clearinghouse for the Fed’s emergency lending programs.
- Dimon was successful in getting the Fed to provide JPMorgan Chase with an 18-month exemption from risk-based leverage and capital requirements.