Timothy Geithner is worried about a problem of perception.
In an interview with PBS Newshour, Geithner was asked whether or not it is a conflict of interest for JPMorgan Chase CEO Jamie Dimon to sit on the board of the Federal Reserve Bank of New York, which is responsible for regulating the banks. While not naming Dimon specifically, the Treasury Secretary admitted to PBS Newshour that it’s "a problem" having bankers sit on any Federal Reserve board. In Geithner's view, it creates the perception that the institution, one charged with overseeing Wall Street, is too close to the finance industry.
"It's a problem that the structure of the Fed established 90 years ago... creates that basic perception and I think that’s something worth trying to change," Geithner told PBS. "But the American people should understand that although the Fed was set up that way, those banks and the members of the board play no role in supervision, they have no role in the writing of the rules and they play no role in decisions the Fed makes about how to respond to the financial crisis."
The comments came in response to Massachusetts Senate candidate Elizabeth Warren, who said earlier this week that Dimon should step down from the New York Federal Reserve board in the wake of his bank's $2 billion trading loss.
Geithner, a former president of the New York Fed himself, has himself been criticized for being too close with some of the bankers he once oversaw. Liberal talk show host Rachel Maddow slammed Geithner in an interview in 2010, saying she was "concerned" that during his time at the New York Fed, in which he helped oversee Wall Street bailouts, he didn’t press for reforms at the financial institutions in question.
Geithner also reportedly met with Dimon in March to discuss the Volcker rule, according to Bloomberg, a financial reform provision that Dimon has often criticized. Some Wall Street critics say that the ban on banks trading with their own money could have prevented JPMorgan's huge loss, which lost the bank $2 billion and counting.
Dimon has himself even been floated as a possible replacement for the Treasury Secretary once Geithner steps down, though his name likely isn't on the short list anymore. Still, Geithner has said that JPMorgan's loss may help to fend off efforts to weaken financial reform.
During the PBS interview, Geithner said he wants to make sure that the American people don’t perceive the nation’s oversight system as being too close to the finance industry.
"It is very important, particularly given the damage caused by the crisis, that our system of oversight and safeguards and the enforcement authorities have not just the resources they need, but are perceived to be above any political influence," he told PBS.
CORRECTION: The previous title of this post mistakenly suggested Timothy Geithner had singled out Jamie Dimon as a problem.
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