MacroScope

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

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.

No time to wait

Simon Johnson is a former chief economist at the International Monetary Fund and is currently a professor at MIT and a senior fellow at the Peterson Institute for International Economics. Reuters is not responsible for this content and any views expressed are the author’s alone.
 

Senator Barack Obama won the presidency on Tuesday and comes to Washington in January. But before he even takes office, leaders from around the world descend on Washington November 15th for a Group of 20 summit to tackle the global financial crisis.

The US is saying that a statement of principles (or is that platitudes?) and the establishment of some working groups would constitute success.  The Europeans, particularly Messrs. Brown and Sarkozy, want to establish a process that moves towards some sort of new international financial/economic system (“Bretton Woods II” is the jargon), although they are still quite divided on what this would mean in terms of regulation for financial institutions or – the key point – capital flows.  The emerging markets, who will be very important participants, are not yet putting their cards on the table.