Stiglitz: Federal Reserve Framework Is Corrupt

Monday, 15 Mar 2010 09:25 AM

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The U.S. Federal Reserve's framework is a corrupt one in that its regional banks are managed by board members who are officers from the very private institutions they are designed to govern, says Nobel economist Joseph Stiglitz.

Stiglitz, also a former chief economist at the World Bank, says if a country had come to him looking for aid while running a central bank in such a manner, alarm bells would have gone off.

“If we had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure,” says Stiglitz according to the Huffington Post.

“It's time for us to reflect on our own structure today, and to say there are parts that can be improved.”

The New York Fed presently has on its board of directors Jamie Dimon, the head of JPMorgan Chase, according to the Huffington Post.

Lawmakers are currently negotiating a bill that would overhaul parts of the country's financial regulation.

Nevertheless, debate over the level of independence of a consumer financial product watchdog is slowing progress, says Senate Banking Committee Chairman Christopher Dodd, according to Reuters.

The Obama administration wants to create a watchdog agency to protect consumers.

Dodd seems to agree, but is using the term “office” in place of a new agency lately.

“A lot of attention is being paid to what address the new consumer watchdog will have, but the critical question is 'Will this office have the authority and independence it needs?'”

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