By Peter Schroeder - 06/11/12 05:10 PM EDT
Even Treasury Secretary Timothy Geithner, who worked with Dimon as head of the New York Fed before joining the Obama administration, has expressed sympathy for Dimon's exit from the institution. In an interview with PBS Newshour, he said it is "true" that there is a "basic perception problem" in that the public perceives a conflict when bankers like Dimon have a seat at the Fed. While noting that banking members of the Fed play no role in supervising the banking industry, he said the arrangement is "something worth trying to change."
Sens. Bernie Sanders (I-Vt.), Barbara Boxer (D-Calif.) and Mark Begich (D-Alaska) are pushing legislation that would prohibit bank employees or individuals invested in banks from advising the Fed's network of banks, arguing that it is a conflict of interest to give industry representatives a role at the regulator overseeing the industry. Elizabeth Warren, the consumer advocate challenging Sen. Scott Brown (R-Mass.), made a similar call shortly after Dimon disclosed the bank's losses.
Last Wednesday, Sanders pressed Fed Chairman Ben Bernanke on Dimon's presence at the Fed when he appeared before a congressional panel.
"Many people, including myself, see this as a situation where the fox is guarding the henhouse," Sanders said. "We need real reform in the Fed to make sure it's representing the middle class, small business of this country rather than just Wall Street and the big-money interests."
Bernanke responded that when Congress wrote the law establishing the Federal Reserve system, it stipulated the role of bankers, which means it is up to Congress to change it.
"I think we've made it into something useful and valuable. We do get information from it," he said. "But if Congress wants to change it, you know, of course we will work with you to find alternatives."