A senior Federal Reserve official warned on Thursday that a Senate proposal to make the New York Federal Reserve Bank president a White House appointee risks injecting a dangerous dose of politics into the deliberations of the central bank.
"This is pretty much blatant politicization of the Fed," St. Louis Federal Reserve Bank President James Bullard told Reuters in an interview. "I also think it's setting up conflicts with the Board of Governors in the future."
Members of the Senate and the House of Representatives are melding versions of financial reform legislation with the goal of sending President Barack Obama a bill for his signature by early summer.
The New York Fed bank's board of directors currently appoint the president of the New York Fed, subject to approval by the Fed board in Washington.
Lawmakers, angry at the Fed over regulatory lapses that led to the financial crisis and to possible conflicts of interest, sought to make the New York Fed leader more accountable by making the post a presidential appointment subject to Senate confirmation.
Bullard said he would welcome a review of the structure of the Fed system mandated in the Senate bill because it could shed light on the public service aspect of regional Fed bank boards of directors. The Senate legislation would bar most bankers from serving on regional Fed bank boards.
"These are really valuable people for the Federal Reserve system, they represent all kinds of different businesses from all around the nation, and most of what they do is provide economic intelligence," he said.
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