Why Are Bank CEO’s Seated on the New York Federal Reserve?

(10 am. – promoted by ek hornbeck)

Cross posted from The Stars Hollow Gazette

Why is the CEO of JP Morgan Chase, or for that matter any bank CEO, sitting on the board of the body that is supposed to regulate their banks? This is a serious conflict of interest in the face of the 2008 bank crisis and, now, the $2 billion loss by Chase. $2 billion, a pittance you say. Well consider that loss triggered a drop in Chase’s market value by another $20 billion

As Matt Taibbi points this is a cause for public concern:

[..] J.P. Morgan Chase is a federally-insured depository institution that has been and will continue to be the recipient of massive amounts of public assistance. If the bank fails, someone will reach into your pocket to pay for the cleanup. So when they gamble like drunken sailors, it’s everyone’s problem. [..]

{T}he incident underscored the basic problem. If J.P. Morgan Chase wants to act like a crazed cowboy hedge fund and make wild exacta bets on the derivatives market, they should be welcome to do so. But they shouldn’t get to do it with cheap cash from the Fed’s discount window, and they shouldn’t get to do it with money from the federally-insured bank accounts of teachers, firemen and other such real people. It’s a simple concept: you either get to be a bank, or you get to be a casino. But you can’t be both. If we don’t have rules to enforce that concept, we ought to get some.

Dimon being on the board of the New York Federal Reserve is absurd:

The chief executive of JP Morgan Chase — the largest bank in the land, and the exemplar of a ‘too big to fail’ institution — is allowed to sit at the table with the people tasked with deciding when and how much of other people’s money gets earmarked for his rescue. This is not the fox guarding the hen house; this is the fox guarding the hen house while selling synthetic derivatives whose value increases with every hen he gobbles up, and who burns down the hen house so he can collect on his fire insurance policy, and then gets the government to build him a new hen house at taxpayer expense. And then, after that, he still gets to guard the new hen house.

Elizabeth Warren, a Massachusetts Democrat running for U.S. Senate, called for Dimon’s removal:

JP Morgan Chase CEO Jamie Dimon should resign from the NY Federal Reserve Bank Board

Last week, JP Morgan Chase announced a $2 billion trading loss in two months.

Sunday on Meet the Press, JP Morgan CEO Jamie Dimon said, “We know we were sloppy, we know we were stupid, we know there was bad judgment.”

After the biggest financial crisis in generations, Americans are frustrated that Wall Street has still not been held accountable and does not appear to consider itself responsible. Wall Street banks continue to have fundamental problems, and tough oversight and accountability are urgently needed.

Dimon is not only the CEO of JP Morgan, he is also a member of the Board of Directors of the New York Federal Reserve Bank, where he advises the Federal Reserve on the oversight of the financial industry.

Dimon should resign from his post at the New York Fed to send a signal to the American people that Wall Street bankers get it and to show that they understand the need for responsibility and accountability.

Sign Ms. Warren’s petition for Dimon to resign

 

1 comment

    • TMC on May 15, 2012 at 12:51 pm
      Author

Comments have been disabled.