June 19 (Bloomberg) -- JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, who has been criticized by lawmakers for serving on the board of the Federal Reserve Bank of New York, said district banks benefit from industry leaders’ input.
“If I had a board, I’d want to hear from a lot of different types of people,” Dimon said today at a hearing of the House Financial Services Committee in Washington. “It’d be funny to be talking about global markets and not have someone involved in the global markets at the table. It certainly does not have to be me.”
JPMorgan’s trading loss of more than $2 billion has rekindled concern that the New York Fed, the company’s principal regulator, is too cozy with Wall Street. Senator Bernie Sanders, a Vermont independent, along with Democrats Barbara Boxer of California and Mark Begich of Alaska, introduced legislation last month that would remove the industry’s executives from the 12 regional Fed banks’ boards.
Congress created the Fed almost a century ago with public and private features, including putting three bankers on each of the district boards along with six other directors who represent the borrowing public. They play no part in bank supervision.
“The board basically sits around and talks about the economy,” Dimon said today. “It’s more of an informational, advisory group.”
The Fed reviews capital plans of the largest U.S. banks, including JPMorgan, to make sure they can withstand economic stress and in March approved Dimon’s proposal to increase the dividend and buy back shares. The company subsequently suspended the repurchase program.
Timothy F. Geithner, now the secretary of the U.S. Treasury Department, led the New York Fed in 2008 when it bailed out insurer American International Group Inc. and took on assets from Bear Stearns Cos. to help JPMorgan buy the investment bank.
The 2010 Dodd-Frank Act ended the practice of banker-directors having a vote in electing regional presidents, a move that New York Fed President William C. Dudley said in a September interview that he supported.
Fed Chairman Ben S. Bernanke told the Joint Economic Committee on June 7 that he would be willing to work with Congress on a bill that would remove bankers from Fed boards.
“If Congress wants to change it, of course we will” work with lawmakers, Bernanke said in response to a question from Sanders. “Congress set this up,” and “we’ve made it into something useful and valuable,” he said.
Bernanke said the Fed’s duties have been examined carefully in the aftermath of the credit crisis, including by the Government Accountability Office, the investigative arm of Congress.
“There were no actual conflicts of interest” found, he said. The Fed has “a firewall so that the bankers do not have any information or ability to influence supervisory decisions.”
To contact the reporters on this story: Caroline Salas Gage in New York; Noah Buhayar in New York at firstname.lastname@example.org