Rep. Barney Frank, the top Democrat of the House Financial Services Committee, is taking aim at the hawks on the Federal Reserve.
Frank announced Tuesday he will introduce legislation to strip the 12 regional Fed bank presidents of their votes on the central bank’s interest-rate setting Federal Open Market Committee. …
Under its current structure, 12 of the Fed’s 19 members vote at interest rate setting meetings. The seven members of the Fed’s board of governors in Washington, who are appointed by the president and confirmed by the Senate.
The regional Fed presidents are picked by their individual boards of directors, often regional bankers and local business leaders. While the president of the key Federal Reserve Bank of New York also always has a vote on the FOMC, the remaining eleven Fed bank presidents rotate as voting members.
In a discussion on CNBC of his bill, Frank said the current Fed structure is undemocratic. He noted that regional Fed bank presidents are not picked by elected officials, so they should not vote on key public-policy issues such as setting the level of interest rates.
Regional Fed bank presidents are picked by their boards of directors, made up of regional bankers and local business leaders.
“I think it is fine for them to sit in and make recommendations,” but when it comes to voting they should be excluded, Frank said.
You go, Rep. Frank. Allowing bankers and private businesses to select Fed officials with vast power over all of us was a bad idea from the start. It is as if oil companies selected the officials responsible for crude oil pricing: a conflict of interest ripe with opportunities for abuse. Predictably, bankers and commentators from the financial industry are opposed.
Mark L. Bail says
the politics of Washington is a bad idea, IMHO.
I like democracy, but I don’t like what passes for it within the Beltway these days: the radical right making crazy demands and the Democrats capitulating. We’ll end up with the FED looking like our Supreme Court.
As Mark Thoma writes,
bostonshepherd says
And while we’re at it, let’s get the Fed back to its crucial, single-mandate role — keeping the money supply stable/keeping the dollar sound.
Revoke its other mandate, economic growth, and leave that to the policy makers, or, better still, markets.
couves says
Greenspan, Bernanke and most of the Washington political leadership support the same easy money policy that caused the housing bubble. It wasn’t caused by some shadowy conspiracy of bankers, just a macroeconomic policy that’s unsound.
roarkarchitect says
Lets let him play with the Fed’s now, what could go wrong ?
The independence of the FED is extremely important, even though I disagree with QE – god forbid if the politicians got their hands on the controls.