WASHINGTON — Vermont Sen. Bernie Sanders, hoping to capitalize on recent calls for JPMorgan Chase CEO Jamie Dimon to resign from the board of the Federal Reserve Bank of New York, introduced legislation Tuesday that would bar bank industry executives from serving on the boards of regional Fed banks.
At a Capitol Hill press conference, Sanders argued that the Fed's loans to banks during the crisis highlight a clear conflict of interest at regional Fed banks.
"This is not just a perception problem. This conflict is real," said Sanders, an independent who caucuses with Senate Democrats. "If this is not a clear example of the fox guarding the henhouse, I don't know what is."
Sanders has long been concerned about the presence of bank executives on regional Fed boards, and he was successful in getting a requirement for a study of the issue included in the Dodd-Frank Act.
That study, published last fall by the Government Accountability Office, found that the current set-up creates the appearance of a conflict of interest.
Since the revelations of at least $2 billion in trading losses at JPMorgan, Democratic Senate candidate Elizabeth Warren has called on Dimon to step down from the New York Fed's board. Treasury Secretary Timothy Geithner has not gone as far, but he has said that it's important that financial regulatory officials be perceived as independent.
Under Sanders' bill, no one who works for or invests in a firm that is eligible to receive assistance from the Fed would be allowed to serve on the board of any Fed bank. The measure would also prohibit Fed employees from owning stock in companies that the Fed oversees.
The bill is being co-sponsored by Democratic Sens. Barbara Boxer and Mark Begich.
When asked why he believes the proposal could succeed when it has failed in the past, Sanders said, "I think our friend at JPMorgan Chase has given us an example of why we need these reforms."
Despite the fallout from the JP Morgan trades, the bill appears to face long odds in Congress. At Tuesday's press conference, Sanders and Boxer said they have not spoken to either the White House or the Senate's Democratic leadership about the bill.