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JPMorgan Chase & Co
Lee Bollinger, president of Columbia University and chairman of the New York Federal Reserve’s board of governors, is facing criticism over his support of JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon.
A group of 53 Columbia professors, students and alumni released a letter yesterday denouncing Bollinger’s defense this week of Dimon, a fellow member of the New York Fed board who testified to Congress today about JPMorgan’s recent $2 billion trading loss. Bollinger, 66, dismissed calls for Dimon to step down from the Fed board after the losses were revealed.
“As an educator you have a special responsibility to demonstrate moral and intellectual credibility, something you have failed to do in this situation,” the group said. They urged Bollinger to reverse his support and call for Dimon’s immediate resignation.
The group, which includes Eric Schoenberg, an economics professor at Columbia Business School, also said Bollinger may have a conflict of interest because of donations JPMorgan made to Columbia. David Stone, a spokesman for Columbia, said in an e-mail that the Ivy League university has collected about $2 million from the bank in the past eight years, representing less than 1 percent of its fundraising.
Stone declined to comment further.
Lawmakers are questioning Dimon at hearings this week and next about the bank’s losses after he initially called April news reports about the trades “a complete tempest in a teapot.” Shares of the bank, the biggest in the U.S. by assets, dropped 17 percent through yesterday since Dimon disclosed the mounting losses on May 10, lopping about $26.5 billion from the firm’s market value.
Dimon, 56, said in prepared remarks to Congress today that his traders didn’t understand the risk they were taking with bets on credit derivatives and hurt the bank. He also said it was an isolated event and may have been fueled by switching to a new risk model.
Bollinger, who joined the board of the New York Fed after Columbia hired him in 2002, told the Wall Street Journal this week that people calling for Dimon to step down from the board were “foolish” and possessed a “false understanding” of how the Fed works.
Columbia, which was founded in 1754, is located on Manhattan’s Upper West Side and belongs to the Ivy League, which comprises eight private colleges in the U.S. northeast.
Bollinger abdicated his responsibility to maintain the “integrity, dignity and reputation of the Federal Reserve System” by supporting Dimon’s tenure, according to the letter. Not only is the trading loss being investigated, Dimon has “long campaigned aggressively against important regulatory reforms designed to protect excessive risk taking,” they said.
“Gamblers should not have power over the banking system,” Marcellus Andrews, a professor of economics at Columbia, said in a statement attached to the letter. “Dimon is a gambler of the worst sort -- one whose arrogance is such that he mistakes a run of good luck for skill and surrounds himself with boot lickers -- in banking and in politics.”
Simon Johnson, a professor at the Massachusetts Institute of Technology in Cambridge, Massachusetts, started a petition on the website Change.org calling for Dimon’s removal and has collected more than 36,000 signatures. Johnson is a former chief economist at the International Monetary Fund.
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