Warren: Bank self-regulation "wrong and dangerous"

(CBS News) JPMorgan Chase's admission last week that it lost more than $2 billion in one set of trades should be used as a wake up call to end the practice of banks regulating themselves, Massachusetts Senate candidate Elizabeth Warren said on Monday.

Warren repeated hercall for the bank's chief executive, Jamie Dimon, to step down from his role as a top official at the New York Federal Reserve Bank, which oversees the nation's largest banks.

"We have to say as a country, no, the banks can not regulate themselves," Warren said in an interview with "CBS This Morning," adding "what has happened here is not just about JPMorgan Chase."

"They are financial institutions that run the risk of taking down everyone's job, run the risk of taking down everyone's pension, run the risk of taking down the entire economy and that means it is appropriate to have some government oversight," she said.

In an interview that aired Sunday on NBC, Dimon said he was "dead wrong" to dismiss concerns raised a month earlier about the bank's trading practices as a "tempest in a teapot."

Dimon has been one of the most vocal opponents of the new rule aimed at preventing risky trading that was proposed in the wake of the 2008 financial crisis. Named after former Fed chairman Paul Volcker, the Volcker rule essentially would have banned the banks from using their own money to gamble in the financial markets.

First proposed two years ago as part of the overhaul of Wall Street regulation, the details of the rule have not been finalized and the fight over what would and would not be allowed is still ongoing before the July deadline to decide precisely what would be prohibited.

The JPMorgan Chase trade may have inadvertently showed how the banks planned to get around the forthcoming regulations. The rule included an exception for so-called "hedging," which is typically used to prevent losses from getting too large. But the banks were using the "hedge" to gamble, essentially making the rule moot.

"Notwithstanding the fact that we are just coming out of this huge crisis, Jamie Dimon has been the one who has led the charge in order to say, nope, no more regulation, fight back against regulation, called the regulation un-American, and resist, tried to put loopholes into the regulation, hire an army of lobbyists. This has really got to stop," Warren said.

The former head of the panel overseeing the way the 2008 bank bailout noted it is not just Dimon. All the major banks have continued to promote the idea that there is no need for anyone from the outside looking at them.

"And I think that is just fundamentally wrong. It's wrong and dangerous," she said.

Warren said Dimon's resignation from the New York Fed would be a public acknowledgement that he is in a position of trust.

"Right now he holds the position -- think about this -- with the New York Fed in which he is advising the New York Fed about the appropriate oversight of banks like his bank," she said. Dimon now serves on the board of directors at the New York Fed.