WASHINGTON Federal Reserve Chairman Ben Bernanke said on Thursday it is up to Congress to address any conflict of interest created by having JPMorgan CEO Jamie Dimon on the board of the New York Fed, which regulates his bank.
The potential conflict was brought to light recently by a surprising multibillion-dollar trading loss at JPMorgan that raised questions about the Fed's ability to monitor risk at large financial institutions.
Senator Bernie Sanders told Bernanke during the Fed chief's testimony before the Joint Economic Committee that having Dimon on the New York Fed's board was like "the fox guarding the hen-house."
Sanders, an independent from Vermont, added: "The American people, I believe, see a conflict of interest when you have, among others, the head of the largest financial institution in America sitting on the New York Fed, which is presumably supposed to be regulating these financial institutions."
Bernanke replied that it was Congress that required the regional Fed banks to have bankers on their boards, and that it was up to lawmakers to change the central bank's governance structure if they find it inappropriate.
"Congress set this up. We have taken a lot of actions to negate conflict of interest," Bernanke said. "But if Congress wants to change it, then, of course, we will work with you to find alternatives."
Last month, three U.S. senators proposed legislation barring bankers from serving on the boards of the Federal Reserve's 12 regional banks, saying the practice poses dangerous conflicts of interest highlighted by the case of JPMorgan Chase & Co.
(Editing by Tim Ahmann and Jan Paschal)