Does J.P. Morgan Chairman and Chief Executive Jamie Dimon belong on the board of the New York Federal Reserve? Of course not. And there’s actually a petition demanding his resignation or removal, being pushed by former IMF Chief Economist Simon Johnson.
But it’s also important to note that he didn’t belong on the board two months ago either—before the large trading loss J.P. Morgan suffered made news. And it’s not just Dimon, it’s the whole structure of Federal Reserve banks that needs reform.
The problem is that the boards of directors for regional Federal Reserve banks are composed of financial-sector executives—and these boards then get to choose five of the 12 voting members of the Federal Reserve’s Open Market Committee (FOMC), the body that makes monetary policy decisions. So, essentially 42 percent of the committee that controls the single most important lever of macroeconomic policy for the country is picked by banking executives. Oh, and the New York Fed, while technically a regional bank, occupies a permanent seat on the FOMC.
This is all made more ironic by the fact that any attempt by outsiders to criticize the Fed often leads to distressed hand-wringing by the Beltway elite about the sanctity of Fed “independence.” But of course, they are not talking about “independence” in any normal sense of the word, but rather independence from having to consider the views of those in the economy who might have different interests from finance.
So, sign the Dimon petition. But also, and much more importantly, support the efforts by legislators in Congress like Barney Frank and Bernie Sanders to undertake more comprehensive reform of the Fed. Because none of this is personal, it’s just business.