"The fox is guarding the henhouse," says former IMF chief economist Simon Johnson of Jamie Dimon's position on the New York Fed's board of directors. And more than a few political and economic heavyweights agree with him.
For those who have somehow managed to ignore the latest round of big-bank backlash, J.P. Morgan Chase CEO Jamie Dimon is under fire for more than $2 billion in trading losses that J.P. Morgan sustained as a result of risky trading in its London office. Though the losses are relatively small within the context of J.P. Morgan's assets, they have for some brought back the uneasy feelings associated with the early stages of the financial crisis. Johnson has penned a petition with an accompanying letter to Fed Chairman Ben Bernanke demanding that Dimon either resign from or be removed from his position at the New York Fed.
"It is entirely unacceptable to have Mr. Dimon involved in the governance of the New York Fed, an organization that oversees his activities, decisions, and potential losses," writes Johnson.
The New York Fed has declined to comment on the matter, but plenty of other people have lots to say about it, including Johnson, more than 33,000 petition-signers, and a few high-profile compatriots. Massachusetts Senate candidate Elizabeth Warren has said that Dimon should not be on the board of directors, and Treasury Secretary Timothy Geithner has also said that it's "worth trying to change" the apparent closeness between commercial banks and the New York Fed. And Vermont Sen. Bernie Sanders has introduced a bill that would amend the Federal Reserve Act to prohibit people employed by entities regulated by the Fed Board of Governors from serving on a Federal Reserve Bank's board of directors.
In addition, Change.org, which hosts Johnson's petition, boasts that a few big names from the often stuffy economics field have shown their umbrage by signing on to Johnson's letter: Harvard economist Richard Freeman, MIT economist Daren Acemoglu, and the Economic Policy Institute's Heidi Shierholz.
The nine directors on the New York Fed's board of directors include three "class A" members—among them, Dimon—elected by member banks to represent them. And though those members do not themselves have a direct hand in regulatory or supervisory matters, their activities and even very existence at the Federal Reserve Bank are now being called into question.
"I think there are some real questions that need to be answered, and the Jamie Dimon fiasco, event, whatever you want to call it, is an opportunity for review of the structure of these boards, which are antidemocratic," says Ed Mierzwinski, consumer program director at consumer group U.S. PIRG. "Why do there have to be so many banks on the board?"
While working to avoid conflict of interest is worth doing, it is also important to have experienced bankers on the boards of directors, says John H. Makin, resident scholar at the American Enterprise Institute.
"The Federal Reserve boards, the regional boards, want to have people with experience in the sector on their boards for input. That's desirable, and it has been for a long time," he says.
Even if Dimon remains on the board of directors, Johnson and his 33,000 friends may not have long to wait before they get their wish: Dimon's term on the board expires on December 31.
Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter at @titonka or via E-mail at email@example.com.