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Inside Washington (05/23/2012)
WASHINGTON (5/24/12)--Richard Fisher, president of the Federal Reserve Bank of Dallas and a former banker, called for a reduction in the size of the largest banks to help stabilize financial system. In an interview with American Banker (May 23) Fisher said he was in favor of using the term "right sizing," rather than "breaking up" the largest banks. Maintaining a grasp of risk management beyond mathematics becomes difficult as firms become increasingly larger, as evidenced by recent bank failures, Fisher said. Fisher has not made any specific proposals but he is joined in the collective voice to "right size" large banks by such industry leaders James Bullard, president of the Federal Reserve Bank of St. Louis; Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, Tom Hoenig, former president of the Federal Reserve Bank of Kansas City; and former Federal Deposit Insurance Corp.'s chairman Sheila Bair …

WASHINGTON (5/24/12)--Lawmakers on Tuesday expressed surprise that the heads of two regulatory agencies did not learn of trades that led to a massive loss at JPMorgan Chase until they were reported by the media (American Banker May 24). Mary Schapiro, who heads the Securities and Exchange Commission, and Gary Gensler, chairman of the Commodity Futures Trading Commission, said they were informed of the loss through the media. During a Senate Banking Committee hearing Tuesday, Sen. Richard Shelby (R-Ala.) asked Gensler to clarify how he received the reports. Schapiro and Gensler's testimony show that regulators still lack transparency in discerning the risk of activities undertaken by large financial institutions, three-and-a-half years after the collapse of insurer AIG. The transactions that caused the loss did not take place inside JP Morgan's U.S. broker-dealer, which is regulated by the SEC, Schapiro said. The trades took place in U.K. branch of JP Morgan's commercial bank, which is regulated by the Office of the Comptroller of the Currency, and in another U.K. branch. Democrats on the Banking Committee argued that JPMorgan losses illustrate why strong implementation of Dodd-Frank Act is needed to address the system risk presented by large financial institutions Republicans countered that Dodd-Frank seeks to micromanage financial institutions, which is an impossible task  …

WASHINGTON (5/24/12)--Sen. Bernie Sanders (I-Vt.)  introduced legislation to prohibit banking industry executives from serving as directors of the 12 Federal Reserve regional banks. Sen. Barbara Boxer (D-Calif.) is an original co-sponsor of the measure to end conflicts of interest involving regulators and the financial institutions they regulate.  She joined Sanders at a news conference introducing the bill. Sen. Mark Begich (D-Alaska) also is a co-sponsor. The recent multi-billion-dollar trading loss at JPMorgan Chase underscored the need for reform the Federal Reserve System, Sanders said. "It is a blatant conflict of interest for Jamie Dimon, the CEO and chairman of JPMorgan Chase, to serve on the New York Fed's board of directors," Sanders said. "If this is not a clear example of the fox guarding the henhouse, I don't know what is" …


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