JPMorgan Chase Debacle Highlights Federal Reserve Conflicts
May 14, 2012
WASHINGTON, May 14 - Sen. Bernie Sanders (I-Vt.) said today that the $2 billion trading loss by JPMorgan Chase underscores the need for Federal Reserve reforms to eliminate blatant 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.
"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."
Government Accountability Office audits, which were required by a Sanders amendment to Wall Street reform law, 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.
- 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.
- Dimon convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JPMorgan Chase acquired this troubled investment bank.