Sanders calls for JPMorgan's Dimon to step down from NY Fed board

By Vicki Needham - 05/14/12 03:58 PM ET

A Senate independent is calling for the head of JPMorgan Chase to step down as a board member of the Federal Reserve Bank of New York.

Sen. Bernie Sanders (I-Vt.) said Monday that the $2 billion trading loss by JPMorgan underscores the need for the Federal Reserve to make changes that eliminate conflicts of interest.

"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 said.

Sanders said he is working on legislation that would end the 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 said.

"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," he said.

"This is a clear example of the fox guarding the hen house."

A Government Accountability Office (GAO) audit, which was pushed by Sanders and is required under the Dodd-Frank financial reform law, found that Dimon served on the Fed board at the same time that his bank received more than $390 billion in total emergency loans from the Fed.

In addition, the Fed used JPMorgan as a clearinghouse for the Fed's emergency lending programs, gave the firm an 18-month exemption from risk-based leverage and capital requirements and took risky mortgage-related assets off of Bear Stearns's balance sheet before JPMorgan acquired the firm.

Sanders said all the actions were orchestrated by Dimon.

Elizabeth Warren, the Massachusetts Democrat running against Sen. Scott Brown (R) for a Senate seat, made the same comments over the weekend and renewed her calls for Dimon to leave the position during interviews on Monday.

"This is about accountability," Warren said on CNN’s "Starting Point" Monday morning.

Banks have been loading up on risk and they don’t want to be accountable,” she said.

Dimon has been a strong critic of new regulations enacted by the Dodd-Frank financial reform law, in particular the Volcker rule, which is intended to prevent banks from making high-risk trades for their own profit.

He acknowledged that the bank’s misstep would provide new evidence for lawmakers and federal regulators wanting strict controls and oversight on banking practices.

"We know we're sloppy. We know we were stupid. We know there was bad judgment," Dimon said on NBC’s "Meet the Press" on Sunday.