Tags: federal reserve | makeover | new york | fed bank chiefs

New York Fed Makeover Gets Mute Support From Fed Bank Chiefs

Tuesday, 10 Mar 2015 07:29 AM


A proposal to reduce the authority of the Federal Reserve Bank of New York, advanced by the head of the Dallas Fed, isn’t getting much support from other central bank officials.

Cleveland’s Loretta Mester on Monday became the third of the system’s 12 regional bank presidents to say she’s satisfied with the existing setup, which gives the New York Fed greater power over monetary policy than the other reserve banks.

“The current structure has worked, I’m going to say, pretty well for 100 years,” Mester said during an audience question-and-answer session after delivering a speech in Washington. “I would leave it alone.”

San Francisco’s John Williams and Chicago’s Charles Evans both said last week they thought the current system works and has served the national interest.

The Fed is under pressure from both parties in Congress to be more transparent and accountable. Republicans are unhappy with aggressive monetary policies that have pumped its balance sheet up to a record $4.5 trillion and what they consider to be regulatory overreach. Democrats have criticized the New York Fed for being too close to the big Wall Street banks that it oversees.

Dallas Fed President Richard Fisher, who steps down March 19, has used his remaining time in office to promote an overhaul that would reduce the power of the New York Fed and distribute more influence to the system’s other regional banks.

Fully and Frontally

He has said his plan would “fully and frontally address the concern of many who feel that too much power is concentrated in the New York Fed.”

Fisher said he was not discouraged by the push-back.

“People are going to have different views. That’s good. That’s healthy,” he told reporters in Houston on Monday after delivering his final speech as a Fed official.

Fisher’s plan would, among other things, strip the New York Fed of its permanent vote on the Federal Open Market Committee in favor of an equal vote rotation among all 12 reserve banks. Currently, the 11 other regional bank heads rotate into voting seats on the FOMC, with Chicago and Cleveland voting every other year and the rest every third year.

A New York Fed spokeswoman declined to comment on the Fisher proposal.

Very Strongly

Senate Banking Committee Chairman Richard Shelby, the Alabama Republican who held a hearing last week on the Fed, has said he is looking “very strongly” at Fisher’s proposal. Shelby has said he would canvass the regional presidents for their views.

Shelby last week signaled he wants to work with two Democratic critics of the Fed to fashion legislation aimed at the central bank after a hearing in which lawmakers of both parties attacked its record.

Shelby said he saw scope for legislation that would address his concerns along with those of committee members Sherrod Brown and Elizabeth Warren, both Democrats, and Republican David Vitter.

Fisher has also proposed that the largest U.S. banks, many of which are headquartered in New York, be supervised by Fed staff from outside their home districts.

The Fed was established by Congress in 1913. Its structure and operations have been updated several times since, including in 1933 when the FOMC was created.

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A proposal to reduce the authority of the Federal Reserve Bank of New York, advanced by the head of the Dallas Fed, isn't getting much support from other central bank officials. Cleveland's Loretta Mester on Monday became the third of the system's 12 regional bank...
federal reserve, makeover, new york, fed bank chiefs
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2015-29-10
Tuesday, 10 Mar 2015 07:29 AM
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