On May 10 of this year, Jamie
Dimon, Chairman and CEO of JPMorgan, announced that billions of insured
deposits at his bank had been invested in high risk derivatives and had
sustained at least a $2 billion loss. The Department of Justice and FBI
have commenced investigations. Dimon is expected to announce the
current extent of those losses this Friday in an earnings conference
call.
Following the May 10
announcement, there were numerous calls for Dimon to step down from the
Board of Directors of the Federal Reserve Bank of New York. That
organization is the primary regulator of the firm. There was widespread
public outrage that the CEO of a bank had no business serving on the
governing body of his regulator. (The New York Fed has a long history
of such conflicts.)
Now it has
emerged that not only was Dimon conflicted in his role on the New York
Fed but the President and CEO of the New York Fed had an equally dubious
conflict of interest.
William C. Dudley has been employed by the New York Fed since January 1,
2007, first heading up the powerful Markets Group. That Group manages
the supply of bank reserves in the banking system according to the mandate
of the Federal Open Market Committee (FOMC). On January 27, 2009,
Dudley was elevated to President and CEO of the New York Fed. Financial disclosure forms for 2008 through 2010 show
that Dudley’s wife, Ann Darby, was a former Vice President of JPMorgan
and had holdings of more than $1,500,000 in deferred income accounts at
the firm as well as between $250,000 to $500,000 in a 401(K) plan there.
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