WASHINGTON — It's the perception problem regulators at the Federal Reserve Board would rather go away.

The fallout of JPMorgan Chase & Co.'s $2 billion trading loss has reignited old worries of just how close Wall Street is to one of its top regulators, the Federal Reserve Bank of New York. Politicians and consumer activists have called for Jamie Dimon, JPMorgan's chairman and chief executive, to resign from his position as a board director at the New York Fed.

Yet most observers agree that the perceived conflict of interest is just that — a perception that is a far cry from reality. Neither Dimon nor other directors from financial institutions have any role in the Fed's regulatory activities.

Still, the situation begs the question of whether the central bank should do more to distance itself from the institutions it regulates, especially when it comes to bankers who sit on the boards of all 12 Federal Reserve banks.

"Just because it's a perceived conflict of interest doesn't mean it's a real one," said Karen Shaw Petrou, managing partner at Federal Financial Analytics Inc. "It's a perception, but the reality isn't there. The question is: Does the Fed need to cleanse itself even of the perception that isn't right?"

The issue was stirred up again after Elizabeth Warren, the Harvard professor who helped set up the Consumer Financial Protection Bureau and is now running for Senate in Massachusetts, called for Dimon's ouster from the New York Fed.

"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," said Warren, in a statement issued shortly after the bank's CEO appearance on NBC's Meet the Press. "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."

Spokespersons for the New York Fed and JPMorgan Chase declined to comment for this article.

The issue is far from new for Fed officials, who have always tried to strike a balance between keeping the institutions the central bank regulates at arm's length, while also gaining the necessary information it needs to make important policy decisions.

"The Fed has always made the decision that the value it gets from the information outweighs the political cost of the perceived conflict," said Petrou. "If the decision is still right, it's really their call because no one else I think can make that political judgment."

But calls for a change are growing louder.

Treasury Secretary Tim Geithner, a former president of the New York Fed, suggested that the structure of the Fed might be worth reforming.

"The perception is a problem," Geithner said in an interview with PBS NewsHour's Jeffrey Brown on Thursday. "And it's worth trying to figure out how to fix that."

Stalwarts of the Fed disagree, saying such calls are "misguided" and "fairly ignorant" given the Fed's existing structure established by Congress.

"I don't see Jaime Dimon's conflict of interest," said Ernest Patrikis, a partner with White & Case LLP and former general counsel of the New York Federal Reserve. "What's the conflict? He's expected to represent the banks' view, the lenders' view."

Since the Fed's inception in 1913, there has always been a misperception that bankers have controlled the Board of Governors. While there might be influence, observers says it's not so.

"It is a misconception that has very, very deep historical roots," said Kenneth Guenther, the former head of the Independent Community Bankers of America. "For the first 100 years of the Fed's life, which is soon coming to an end, there's always been this power dynamic between the role of the major banks and the independent Federal Reserve. That's why you have a Federal Reserve that is constituted the way it is."

Congress attempted in 1977 to address the issue. It passed the Federal Reserve Reform Act, which allowed only three bankers — from a large, mid-size, and small institution — to sit on the nine-member Fed boards. The other six members of the boards cannot be affiliated with a bank.

But critics have continued to argue that all bankers should be banned from such a position.

Opponents of that idea say it's an attempt by some to centralize all of the powers of the central bank in Washington. They argue such an action could weaken the Fed's ability to tap into local and regional economies to help inform its decision making, including monetary policy.

"I think that's more of a political statement by those who are espousing that then one that really reflects the needs of everything to run out of Washington," said Chip MacDonald, a partner at the law firm Jones Day in Atlanta. "You wouldn't have any local responsiveness or any local input into policy. This is just another stone cast at the way the Federal Reserve was formulated and trying to get more centralized control."

Others argue it would also put the Fed's independence at grave risk.

"The one thing that having shareholders and directors does is it makes the Reserve banks not part of the government," said Patrikis. "The Board of Governors is the government. If the Reserve Banks became the government, then its relationship with others would change and it would become like the Board of Governors."

For all its muddiness, observers argue, the central bank needs to be intertwined with the commercial banking system in order to do an effective job.

"If you have centralized the power and the authority in Washington, the Board may not be able to act with as much knowledge as people on the ground can and to a certain extent the local Reserve banks don't operate in a vacuum without input from Board staff either," said MacDonald.

It's an argument reminiscent of the charge made by Tom Hoenig, former president of the Federal Reserve Bank of Kansas City, and others when there was a threat to take supervision away from the Reserve banks. Fed officials ultimately won that fight, and supporters say they should oppose further changes to the Fed's governance.

"It should resist fully. That's just buckling under popular whim of uninformed people," said Patrikis.

Still, it's hard to wave away the general uneasiness held by much of the public and critics of the Fed, who have become more concerned about the issue since the 2008 financial crisis.

"Ultimately the system has to rely on trust that people won't abuse power and there are times, of course, when nobody believes that's quite true, and I suspect that we are in one of those times," said Mark Flannery, a professor at the University of Florida.

That's why the recent episode with JPMorgan has become a "major perception problem for the Fed," Guenther said.

"I do think there is a public perception problem when the head of the largest bank gets into a massive highly publicized trading loss, which he articulately condemns, when he's tied to the Federal Reserve Bank of New York, and the president of the Federal Reserve Bank is vice chair of the Federal Open Market Committee," said Guenther. "There is a perception problem. I don't think there's any way around it."

By stepping down Dimon could avoid tarnishing the institution's reputation any further, he said.

"It would be very noble of Jaime Dimon to step down from the Federal Reserve Bank of New York, because it hurts the Fed at this time being on the board of directors at the Federal Reserve Bank of New York," said Guenther.

But others said it's an issue that Dimon's departure alone couldn't resolve.

"The public is highly distrustful of Wall Street, and probably extends that to the Fed," said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University. "I don't know that Jamie Dimon stepping down from the New York Fed is going to restore that trust. It's a much deeper issue than just Jamie Dimon. It goes to the whole experience we went through four years ago with the bailouts. Banks themselves are not trusted as they used to be. It used to be the strongest asset a bank had, but banks are not trusted anymore."

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