The measure is aimed at barring what Sanders and Boxer call a conflict-of-interest. | JAY WESTCOTT/POLITICO Bill targets Fed conflicts

On the heels of JPMorgan’s stunning trading losses, two senators on Tuesday unveiled a bill that would ban financial executives from regulating themselves by taking positions at the Federal Reserve.

The measure is aimed at barring what Sens. Bernie Sanders (I-Vt.) and Barbara Boxer (D-Calif.) call a conflict-of-interest issue that includes JP Morgan Chase CEO Jamie Dimon, who sits on the board of the New York Federal Reserve.


“How do you sit on a board, which approves $390 billion of low-interest loans to yourself?” Sanders said at a news conference rolling out the bill. “Who in America thinks that makes sense?”

Under the bill sponsored by Boxer and Sanders, two of the most liberal members of the Senate, people who work for or invest in companies that can receive financial aid from the Federal Reserve would be banned from sitting on any of the Fed’s 12 boards of directors. Federal Reserve workers and board members would also be barred from owning stock in firms that the Fed oversees. The bill is also co-sponsored by Sen. Mark Begich (D-Alaska).

A 2011 Government Accountability Office study that Sanders requested as part of the Dodd-Frank financial reform bill warned of “reputational risks” to the Federal Reserve system because of its affiliation with financial executives. The GAO said there were 18 past and current members of the Federal Reserve’s board tied to firms that got emergency Fed loans during the financial crisis.

“There is a clear conflict of interest … not a perceived conflict, but a real conflict of interest when bank presidents and employees of banks sit on the very boards that regulate them and sometimes bail them out,” Boxer said.

JPMorgan has come under increasing scrutiny on Capitol Hill following the disclosure that the company sustained trading losses of at least $2 billion — and possibly much more. The Senate Banking Committee earlier Tuesday heard from top financial regulators from the Securities and Exchange Commission and the Commodity Futures Trading Commission — the prelude to a hearing in the coming weeks at which Dimon is expected to testify.

Both Boxer and Sanders said Tuesday they believe Dimon should resign from the board of directors for the New York Federal Reserve. Similarly, Massachusetts Senate candidate Elizabeth Warren has also called on Dimon to step down from the board of directors for the New York Fed.

It’s unclear how far the bill will progress. Boxer and Sanders said they have not spoken yet with Senate Democratic leadership about the legislation.

This article tagged under: JPMorgan Chase

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