MIT’s Johnson takes anti-Dimon fight to Fed’s doorstep

June 25, 2012

Simon Johnson is on a mission. The MIT professor and former IMF economist is trying to push JP Morgan CEO Jamie Dimon to resign his seat on the board of the New York Fed, which regulates his bank. Alternatively, he would like to shame the Federal Reserve into rewriting its code of conduct so that CEOs of banks seen as too big to fail can no longer serve.

Asked about Dimon’s NY Fed seat during testimony this month, Bernanke argued that it was up to Congress to address any perceived conflicts of interest.

But Johnson says the Fed itself should be trying to counter the perception of internal conflicts. He told reporters in a conference call:

I want us to have a strong independent central bank. That’s not going to happen if the public are convinced that the Fed is just doing the bidding for a few highly paid bankers who are taking excessive risks without incurring losses. Appearances are being created that there are all kinds of conflicts of interest. […] The Fed needs to be separated from the moneyed interests. Either that or people are going to lose faith in its effectiveness and that effectiveness is going to decline.

On Monday, armed with a petition filled with nearly 38,000 signatures, Johnson took his case straight to the Fed’s board. He did not get a meeting with Chairman Ben Bernanke, but rather met with Scott Alvarez, the central bank’s chief lawyer.

In particular, Johnson’s petition cites Dimon’s role in a recent large trading loss at his bank, and his prominent lobbying against new financial regulations, as reasons why Dimon should go.

Jamie Dimon is CEO of JP Morgan Chase, one of the largest and most powerful banks in the world. Because the bank is “too big to fail”, it enjoys the protection of U.S. taxpayers. As such, Mr. Dimon has a responsibility to safeguard the bank’s financial strength – not just for the sake of his shareholders, but for the public good. Mr. Dimon failed in that duty. He personally approved a very risky trading strategy that not only lost billions of dollars for the firm but also had the potential to destabilize the world’s financial markets.

Mr. Dimon also leads lobbying campaigns to maintain the right to carry out the kind of risky trading that recently lost billions and continue to put the world’s economy at risk.

Asked recently about whether he saw a conflict in his NY Fed role, Dimon told lawmakers that he has no access to privileged information during board meetings. The board “basically sits around and talks about the economy,” Dimon said.

Johnson says this only furthers his argument:

Why does he waste his time on the board of the New York Fed given that he says it has no significance to him? It would be smart from a corporate point of view (for him to step down) given there’s a level of detail that seems to have eluded him.


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Mr. Johnson is a pretty solid character and academic. Relying on educated and well researched ideas at the Federal level could create a turn around for a nation slowing losing its place in the global economy. Well said Mr. Johnson.

Posted by MuradAbel | Report as abusive

With the Supreme Court I can understand how partisanship and bias become involved, but the Fed should be better.

This administration failed us on TBTF and the Fed went along; with both the cronyism and coddling of the Banksters.

Posted by Bartolo | Report as abusive