Nov. 19, 2014
Public Citizen Endorses Governance Reform for Federal Reserve Bank of New York
WASHINGTON, D.C. – Public Citizen enthusiastically endorses new legislation that will improve accountability of the Federal Reserve Bank of New York, a pivotal overseer of America’s largest financial institutions.
The bill, introduced yesterday by U.S. Sen. Jack Reed (D-R.I.), requires that the president of the New York Fed be named by the president of the United States and confirmed by the U.S. Senate.
Currently, this person is named by the board of the New York Fed.
“Key decisions about the massive taxpayer bank bailouts during 2008 came from the New York Fed President, then Timothy Geithner,” said Lisa Gilbert, director of Public Citizen’s Congress Watch division. “But who chose Geithner for this job? Not the U.S. taxpayers or their elected president. Nor was the New York Fed president subjected to hearings and a confirmation vote in the Senate.”
The Senate will conduct hearings on oversight of the New York Fed and the problem of regulatory capture Nov. 21. This follows the release of tapes from Carmen Segarra, a former New York Fed examiner who was fired after she complained about lax oversight. Segarra recorded 46 hours of internal conversations, which became public in September.
“The Carmen Segarra tapes dramatize the problem of regulatory capture,” said Bartlett Naylor, financial policy advocate of Congress Watch. “Regulators should not see themselves as prospective employees of the firms they oversee.”
“Regulators’ independence from the industry they regulate is essential for effective oversight,” added Amit Narang, regulatory policy advocate of Congress Watch. “The New York Fed has been captured by Wall Street and is putting its interests over those of Main Street. Making the president of the New York Fed accountable to the public is a much-needed course correction.”
Reed first proposed his reform in 2010. At the time, the full New York Fed board – including bankers – selected the president. The Dodd-Frank Wall Street Reform and Consumer Protection Act did eliminate the ability of the class of the board composed of bankers from voting on the selection of the president.