The House Financial Services Committee Ranking Member Barney Frank wants to take away Federal Reserve regional President's voting rights on the effective funds rate.
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.
The idea is to remove from power those regional bank Presidents who are voted in by the private sector. The WSJ:
The bill would remove from the 12-member policy-setting Federal Open Market Committee the five members who represent regional Fed banks. Only the seven-member board in Washington, which currently has two vacant seats, would get to vote on interest rates. The congressman said this would make the Fed more democratic and increase “transparency and accountability on the FOMC” by eliminating those officials who are effectively picked by business executives.
The bill effectively puts setting the Federal Funds Rate more in the hands of government Federal Reserve appointees, who already hold a majority vote in the FOMC. It also seems Frank's plan is to leave the New York Federal Reserve in place, whose President always has a vote on the FOMC. The New York Fed Bank President is also appointed by the private sector.
Anyone want Tim Geithner, previous President of the New York Federal Reserve, who completely missed the impending financial derivatives implosion and a key architect of the financial bail outs.....to have more power setting interest rates?