Updated with analyst commentary, potential regulatory action from Japan.

NEW YORK (

TheStreet

) -- Calls for

JPMorgan Chase

(JPM) - Get Report

CEO Jamie Dimon to step down from the board of directors of the New York Federal Reserve are growing louder following the disclosure of the bank's $2 billion trading loss.

Critics argue that Dimon, who has been the industry's loudest critic of some regulations including the need for additional capital buffers and aspects of the Volcker rule, has an undue influence on the New York Fed.

With the bank under scrutiny for the recent losses, Washington officials, notably Massachusetts Senate Candidate Elizabeth Warren, have been demanding his resignation from the board to allow for a proper investigation into the issue.

"We need to stop the cycle of bankers taking on risky activities, getting bailed out by the taxpayers, then using their army of lobbyists to water down regulations," Warren said in a

statement following the disclosure. "We need a tough cop on the beat so that no one steals your purse on Main Street or your pension on Wall Street."

She added that Dimon's resignation will "send a signal to the American people that Wall Street bankers get it and to show that they understand the need for responsibility and accountability."

While Dimon has defended his position, arguing that he serves primarily in an advisory capacity, critics argue that there is an obvious conflict of interest in his continuing to be on the board, even as his bank is under investigation for the losses.

Dimon will testify before the Senate Banking Committee on June 7 about the massive trading loss.

Regulatory pressures are climbing for the bank. On Tuesday, press reports that the bank may face scrutiny from Japan's Financial Services Authority in a probe on insider trading added further concerns about the bank's internal risk controls.

Meanwhile, a clutch of analyst downgrades hit bank stocks amid worsening macro-economic conditions and a harsher regulatory climate. JPMorgan's "CIO" loss extinguishes investor complacency regarding new regulation, Moody's downgrades," Bank of America Merrill Lynch's Guy Moszkowski wrote in a report.

Last Thursday, former IMF economist Simon Johnson launched a

petition on Change.org calling for Dimon's resignation from the board in the wake of the trading losses.

"JPMorgan Chase must be subjected to as thorough an investigation as possible," said Johnson. "But with Jamie Dimon on the Board of Directors of the New York Fed, which has the duty to supervise and regulate JPMorgan Chase, the public can't believe that an honest investigation can occur or that real accountability can ever come from it."

The petition has already received about 30,000 signatures.

Meanwhile Senator Bernie Sanders is trying to pass a measure that would overhaul the Fed's structure, which he says is a clear example of the "fox guarding the hen house."

Under the current structure, all regional reserve banks have a nine-member board of directors. Three of the directors are bankers in their respective districts, known as Class A directors. The remaining six, known as Class B and Class C directors, represent the interests of the public.

The Fed says the inclusion of bankers allows it to get input about actual local economic conditions.

Class A directors are not allowed to appoint the president and the vice president of the Reserve banks, who are in charge of supervision. According to the bylaws, "Class A Directors and Class B Directors who are affiliated with thrift holding companies are also prohibited from voting on the appointment, termination and compensation of any employee assigned to the Bank Supervision Group, and from voting on or otherwise approving that specific portion of the Bank's budget allocated to the Bank Supervision Group although they may approve and/or vote on the Bank's overall budget."

Still, a report last year by the

Government Accountability Office noted that the presence of bankers on the board gave the "appearance of conflict" and posed a "reputational risk" to the bank.

Treasury Secretary Tim Geithner, who was the former president of the New York Fed, has also weighed in on the issue. "I think it's a problem that that - the structure of the Fed, established 90 years ago, and it's true for Federal Reserve banks across the country, creates that basic perception. And I think that's something worth trying to change," he said in an

interview with PBS Newshour. "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 a financial crisis. Their role is a much more limited role, and the role is to help provide a perspective on what's happening in the economy as a whole."

However he added that it was important that the regulators be perceived as "above any political influence" to build the public's confidence in the system's ability to implement reforms and protect the people.

For those who have a problem with the Fed's structure, the latest JPMorgan debacle offers the perfect timing to argue for change.

However, the Fed might still want to preserve its structure and even if Dimon steps down, the "perception" problem may not go away.

In a release Thursday, Kansas Fed President Esther George defended the Fed's current structure, although she said "directors have a special obligation for maintaining the integrity, dignity and reputation of the Federal Reserve System."

She noted that the guide to conduct for board directors said directors should avoid any action or create the appearance of "affecting adversely the confidence of the public in the integrity of the Federal Reserve."

Given the extent of debate over Dimon's presence on the board undermining the Fed's integrity, that may be enough reason for the CEO to step down.

What do you think? Should Dimon step down from his post? Or is this a larger story that demands an overhaul of the Fed's structure? Vote in our poll.

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Written by Shanthi Bharatwaj in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.