The New York Federal Reserve Bank's president would become a political appointee and bank chiefs like JPMorgan Chase's Jamie Dimon could no longer sit on the board of their regulator under a proposal unveiled by the head of the Senate Banking Committee on Monday.

As part of a new bill aimed at revamping financial regulation after the worst banking crisis since the 1930s, Senator Christopher Dodd's plan gives the president the power to name the head of the most important regional Fed bank.

The bill clamps down on conflicts of interest at the Federal Reserve, making the head of the New York Fed, for example, a position appointed by the president of the United States and not hand-picked by the very bankers the New York Fed is responsible for regulating, the Connecticut Democrat told reporters as he unveiled his bill.

Critics said the proposed governance change could weaken the central bank's independence.

The New York Fed president is currently removed from the political process, which is helpful. But there are people around who would clearly use any Trojan Horse as a way to bring the Fed under more political control, said Charles Lieberman, chief investment officer at Advisors Capital Management and a former New York Fed staffer.

The prospects for Dodd's bill are uncertain. Any legislation that emerges from his committee would need 60 votes in the Senate to overcome procedural roadblocks that are sure to be thrown up by Republicans; the Democrats control only 59 seats.

The bill also proposes creating a second vice chairman of the Fed's Washington-based Board of Governors, who would be in charge of supervision and testify to Congress twice a year -- a move meant to sharpen the central bank's focus on regulation.

The Fed system is made up of 12 regional banks dotted across the nation and the usually seven-strong Washington-based board, whose members are chosen by the president subject to Senate confirmation.

The New York Fed acts as the Fed's arm on Wall Street, implementing monetary policy and regulating most of the biggest U.S. banks. It was at the epicenter of the crisis and has been subjected to intense scrutiny over its central role in the bailouts of big banks and insurer American International Group.

Currently, the New York Fed's president is chosen by a nine-member board of directors, which includes heads of banks it regulates, with consent from the Fed's Board of Governors.

Dodd's proposal would ban any past or current officer, director or employee of a firm supervised by the Fed from sitting on any of the regional Fed bank boards.

That would, for one, affect JPMorgan Chase chief executive Jamie Dimon, who was recently reelected to a three-year term on the New York Fed's board that expires in 2012.

Regional Fed boards offer anecdotal information to policymakers and make recommendations on monetary policy, but they have no policy-making powers.

Dodd's proposal would also eliminate the role banks now play in naming two-thirds of regional Fed bank directors. No company that is supervised by the Fed could vote for directors of a Fed bank under Dodd's plan.

Regional Fed boards usually operate behind the scenes, but the arcane system was thrust into the spotlight last spring.

New York Fed Board Chairman Stephen Friedman resigned in May 2009 amid questions about his holdings and purchases of Goldman Sachs shares after Goldman sought refuge as a Fed-regulated bank holding company at the height of the crisis.

Regional Fed bank directors normally cannot hold shares in bank holding companies, but Friedman was granted a temporary conflict-of-interest waiver.