In the wake of JPMorgan Chase’s $2 billion Fail Whale trade and the ensuing federal investigation into violations of disclosure laws, US Senate candidate Elizabeth Warren has called on JPM CEO Jamie Dimon to resign from his position on the board of the Federal Reserve Bank of New York. The announcement brings to light the fact that bank executives control most of the positions at the regional banks, and they select the Fed regional presidents that help to set monetary policy for the nation. With respect to the New York Fed, those bank executives are typically Wall Street titans. So lords of finance like Jamie Dimon have a role in setting US monetary policy and even Fed oversight policy, a classic case of foxes guarding the hen house.
This is what Warren is calling attention to with her demand. “Wall Street banks continue to have fundamental problems, and tough oversight and accountability are urgently needed,” Warren said in a statement accompanying the announcement. “But 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. After the biggest financial crisis in generations, the American people are frustrated that Wall Street has still not been held accountable and does not appear to consider itself responsible. 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.”
Dimon has been perhaps the loudest voice on Wall Street against the new set of regulations ushered in by Dodd-Frank. In particular, Dimon has castigated the Volcker rule, saying that the regulation restricting certain kinds of proprietary trading by financial firms would cost them around $400 million in compliance costs. Dimon recently called former Fed chair Paul Volcker, for whom the Volcker rule is named, “infantile” and “nonfactual” for his insistence on the need for more regulation of Wall Street. As financial reform architect Barney Frank said when the Fail Whale trade came to light, “JPMorgan Chase, entirely without any help from the government, has lost, in this one set of transactions, five times the amount they claim financial regulation is costing them.”
The Volcker rule as envisioned by federal regulators may not even restrict the type of portfolio hedge engaged in by JPMorgan Chase, though Frank said today on ABC that he hoped it would. The rule has been watered down and cluttered with loopholes by regulators, under pressure from banks like JPM, since its already weakened state from Dodd-Frank. The trade may also have violated proposed derivatives rules, which may have required a trade of this size, involving credit default swaps, to have been cleared and transparently executed.
Warren renewed her call for Dimon to step down after his appearance today on Meet the Press, the product of a fairly unprecedented do-over interview. Dimon admitted that the bank was “sloppy” and “stupid” with the trade, and that his firm exhibited “bad judgment.” Warren reacted to the appearance by saying that “After the biggest financial crisis in generations, the American people are frustrated that Wall Street has still not been held accountable and does not appear to consider itself responsible.”
JPMorgan Chase can most likely absorb the losses from their trade, although it is still in the midst of being wound down and further losses could ensue. But Warren added that “We need to stop the cycle of bankers taking on risky activities, getting bailed out by the taxpayers, then using their army of lobbyists to water down regulations.” The losses do show that Wall Street continues to engage in risky activities, and if this occurred to a less secure bank or in a more volatile trading environment, it could have resulted in a situation where the bank would come back to the government for more aid.
Warren’s opponent in Massachusetts, incumbent Senator Scott Brown, has generally been a darling of Wall Street, raising millions from the financial industry and helping create a series of concessions in the legislative language to Dodd-Frank. This move puts pressure on him as well as Dimon. But I’m glad that it points out the regulatory capture that exists in our regional Federal Reserve banks.




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The NY Fed Board of Directors makes for amusing reading.
Class A, elected by member banks to represent member banks, consists of Dimon and CEOs of two very small banks, one in Puerto Rico. You can guess who’s the BSD in the room.
Class B, elected by member banks to represent the public, consists of a hedgie, a health insurance executive, and Macys’ CEO.
Class C, also elected by member banks to represent the public, consists of an Ivy League president, the Metropolitan Museum’s CEO, and someone who David documented last year attacking Eric Schneiderman, before he sold out.
I was once a huge, huge Warren fan. But after her “terrorism is our most important priority/challenge” posting on her campaign website, I’ve come to expect that she will be another Selloutman, albeit in a skirt. Lotsa talk when she can’t really do anything about something, no real action when she can. Maybe I’ll be proven wrong, but not holding my breath.
Talk is cheap…! 8-(
Terra Fightin’. That is a big red flag, isn’t it?
Jamie is Barry’s BFF. He isn’t going anywhere, yet. Wait til next week. He’ll go under the bus with Shirley Shirrod and Obama’s old pastor if JPM Chase gets too much “unwound”.
When using the corporate name, please use the complete corporate name:
JPMorganChaseKY
Thank you.
This comment is going to seem rather radical, perhaps, but with the banks and other members of Wall Street continuing to play things “their” way, I think it is time to take care of ourselves…
I am still trying to recover financially from the last mess (although it is not fully cleaned up). I am 59 years old, and am struggling to pay off debt to JPMC and others at a time when I should be putting as much money away as possible for retirement. (I might add that I have no retirement savings remaining due to extended unemployment three years ago.)
So, my thought is this — my credit is already ruined for the foreseeable future. Why should I continue to worry about paying off JPMC if they are doing stupid stuff like this that can lead to another major crisis? The banks seem to look out for themselves at the expense of everyone else…Maybe it is time for me to do the same… I would encourage others to also follow suit! Maybe that will get their attention… In the meantime, I am calling JPMC tomorrow and informing them that there will be no further payments made.
Had no idea that Jamie was part of the mix. Oh well. it’s just about money. Money that would be ours, if the rules weren’t rigged to make sure that every last penny of the Middle Class goes to their own health care, student loans, home mortgages that are largely under water, and whatnot.
FWIW, I’d be thrilled to pay as much in taxes as General Electric.
The “Public” Directors should be appointed by the public not the banks. You zeroed in on part of the problem nicely as does Warren.
Elizabeth Warren RRRRRRRRRAWWWWWWXXXXXXXXX!!!!!!!!!
The $700 Trillion in shadow banking bets hedges, swaps, CDOs and the rest of the financial instruments created for trading fees makes $2 billion in losses look like small change. Why not go after the big fish?
Jamie should not only be tossed out of the Fed board, he should be tossed out as CEO and sued by the shareholders to get his “compensation” back since 2008.
He ran that bank into the sewer.
Couldn’t have said it better myself
I’m a Mass resident. I KNOW what Scottie has done to the state, and the nation. Warren isn’t my ideal, but she is my candidate. She won’t vote for the Blunt (Brown) Amendment, the Big Oil tax relief, or the student loan interest raise, like Scottie did.
That said, the shocking idea is that Dimon is STILL THERE!
Why does a candidate have to call for his resignation?
Why does a candidate have to call for his resignation?
Short answer Wall Street runs the SEC that de=regulates them. I giv e yoy Christopher Cox that ran the SEC while the global econ was run over the cliff by the TBTF Banks. http://en.wikipedia.org/wiki/Christopher_Cox
“rather radical”? Maybe you’re just getting smart.
I was divorced in 1972 at age 30. I learned to live without credit rather than go back to square one. Then had a weird encounter in 2000 at age 58, in which an anasthesiologist (sp?) did not show up to collect his due from my insurance for an emergency surgery. When I could not pay the bill, and the insurance would not pay 2 yrs later, they retaliated by destroying the credit I did not have anyway. Now I’m 70, retired, making 40 years living without credit. End of story.
Well,no, I applied for credit at Radio Shack 5 yrs ago to see what would happen and got a letter denying me on the grounds of “No credit history at all, except one report that was very negative”. Pretty bad when you can’t get credit from Radio Shack, huh? Maybe I should see it as a badge of honor?
Smart, gutsy call on her part. If she weren’t an AIPAC clone on Mideast policy, she’d be perfect.
It’s nice to see some meaningful comments on this story. The folks at Huffington Post are all obsessing about Warren’s Indian ancestry.