WASHINGTON – US Federal Reserve Chairman Jerome Powell on Thursday promised to redouble efforts to find “diverse candidates” to replace two high-profile executives who resigned this week following criticism of their securities trading was because the central bank tried to regroup with a blow. A generally steep, technical image.
“I can absolutely guarantee you that we will work hard in both of those processes to find diverse candidates for those two jobs and to give them a fair shot,” Powell said in response to a question from Ohio Representative Joyce Beatty. said. House Financial Services Committee. “It will be a big focus.”
Meanwhile, the heads of the Fed’s regional banks said they welcomed an ethics review — and possible new restrictions on their individual affairs — following a report commissioned by Powell, Dallas Fed Chairman Robert Kaplan and Boston Fed President Eric Rosengren actively traded in securities during 2020, a year. When the Fed was struggling to keep the economy and financial markets on track during the pandemic.
Both men announced on Monday that they would resign, but the controversy has renewed long-standing calls for reform of the Fed’s mysterious structure and in particular the selection process, which largely serves the public for regional bank presidents. is out of sight. It has also given Powell’s critics a new line of reasoning as he awaits a decision by President Joe Biden to reappoint him for a second four-year term.
Other regional bank presidents interviewed this week, while reluctant to directly criticize their late colleagues, supported the need for stricter ethics rules to build confidence in how the Fed exercises its immense power over the economy.
“The world has evolved so I think it is perfectly appropriate for us to review and change the rules,” Atlanta Fed President Rafael Bostic told reporters. The Atlanta Fed could have made it on its own.
Fed officials fall under the same ethics rules governing members of Congress and the executive branch, with additional restrictions against owning financial sector stocks or mutual funds, doing business around the time of Fed meetings, and private profits. access to non-public information.
Both Kaplan and Rosengren said their actions had been reviewed and approved by a Fed ethics officer — a fact that prompted Powell officials to conclude that, at a time when the Fed faces intense scrutiny. Whether it looks mostly for Wall Street or Main Street, the rules themselves could be the problem.
“… in terms of … what changes are needed, I think that’s clearly the case,” San Francisco Fed Chair Mary Daly said this week.
out of step
This is a calculation that has been developing for a long time.
The Fed’s system has its roots in a fundamental American debate over the value of a centralized monetary policy versus regional skepticism of vesting too much power in Washington.
Columbia Law School professor Katherine Judge said the century-long agreement between Washington and the presidential-appointed board of 12 regional banks—still serves the purpose of promoting “more diversified views” about the economy.
But the structure, with regional reserve banks technically established as private institutions owned by banks, with their own boards of directors and outside the scope of some federal statutes, such as the Freedom of Information Act, arguably Modern concepts of democratic governance are out of step.
“In terms of transparency and accountability, the fact that they are neither wholly public nor wholly private, but in a gray space, is because they are playing incredibly important public roles,” particularly Participate in discussions with and occasionally vote on interest rates and others. Monetary policy decisions that affect everyone, the judge said.
As for its flaws, noted William Spriggs, AFL-CIO chief economist and Harvard University professor, as a potential board nominee, the current set-up could probably be fixed without a massive overhaul. , but with close monitoring of regional banks by the board of governors, and a strict recognition of the public obligations of regional presidents.
For example, three of the nine directors of each regional bank are appointed by the Fed’s board of governors, providing an opportunity for influence. In addition, the board has the final decision on who becomes chairman, and Spriggs argued that it could use that authority more aggressively.
“There is a way for the Board of Governors to do a better job … ethical expectations are a part of that,” Spriggs said. “I’m surprised it wouldn’t have happened to some presidents … that you can’t do business, or that you shouldn’t do business” because of the notion of conflict of interest.
“Yeah it’s a strange structure. But fiduciary responsibility is a public fiduciary responsibility.”
Recruiting replacements for Kaplan and Rosengren will be closely examined through that lens, as well as for Powell’s pledge to promote diversity.
by Howard Schneider
This News Originally From – The Epoch Times