Bill In­tro­duced to End Con­flicts of In­ter­est at the Fed­eral Re­serve

Stanstead Journal - - FROM PAGE ONE - Washington, DC

On May 22, Sen. Bernie San­ders (I-VT.) in­tro­duced leg­is­la­tion to pro­hibit bank­ing in­dus­try ex­ec­u­tives from serv­ing as di­rec­tors of the 12 Fed­eral Re­serve re­gional banks.

Sen. Bar­bara Boxer (D-calif.) is an orig­i­nal co-spon­sor of the mea­sure to end con­flicts of in­ter­est in­volv­ing reg­u­la­tors and the fi­nan­cial in­sti­tu­tions they reg­u­late. She joined San­ders at a Capi­tol news con­fer­ence. Sen. Mark Begich (D-alaska) also is a co-spon­sor of the bill.

A Gov­ern­ment Ac­count­abil­ity Of­fice au­dit – con­ducted pur­suant to a San­ders pro­vi­sion in the Dodd-frank Wall Street Re­form law – found that al­low­ing mem­bers of the bank­ing in­dus­try to both elect and serve on the Fed­eral Re­serve’s board of di­rec­tors cre­ates “an ap­pear­ance of a con­flict of in­ter­est” and poses “rep­u­ta­tional risks” to the Fed­eral Re­serve Sys­tem.

The re­cent multi-bil­lion-dol­lar trad­ing loss at Jpmor­gan Chase un­der- scored the need to struc­turally re­form the Fed­eral Re­serve Sys­tem to make a more demo­cratic in­sti­tu­tion re­spon­sive to the needs of or­di­nary Amer­i­cans, not just Wall Street CEOS.

“It is a bla­tant con­flict of in­ter­est for Jamie Di­mon, the CEO and chair­man of Jpmor­gan Chase, to serve on the New York Fed’s board of di­rec­tors,” San­ders said. “If this is not a clear ex­am­ple of the fox guard­ing the hen­house, I don’t know what is.”

“Al­low­ing bank pres­i­dents to play such an im­por­tant role at the Fed – the in­sti­tu­tion that reg­u­lates their in­dus­try – is a con­flict of in­ter­est, plain and sim­ple, and it must come to an end. This leg­is­la­tion will help re­store the con­fi­dence of the Amer­i­can peo­ple that the Fed is a truly in­de­pen­dent en­tity,” Boxer said.

The Fed­eral Re­serve is re­spon­si­ble for both su­per­vis­ing the fi­nan­cial ser­vices sec­tor and de­cid­ing whether to pro­vide bank hold­ing com­pa­nies low­in­ter­est loans through the dis­count win­dow.

Un­der cur­rent law, two-thirds of the Fed­eral Re­serve Bank board mem­bers are di­rectly ap­pointed by the fi­nan­cial ser­vices in­dus­try and one-third of the Fed di­rec­tors are em­ployed in the fi­nan­cial ser­vices in­dus­try that the Fed is in charge of reg­u­lat­ing.

Un­der the leg­is­la­tion, no one who works for or in­vests in a firm el­i­gi­ble to re­ceive di­rect fi­nan­cial as­sis­tance from the Fed would be al­lowed to sit on the Fed’s board of di­rec­tors or be em­ployed by the Fed.

The mea­sure also would pro­hibit Fed­eral Re­serve em­ploy­ees or board mem­bers from own­ing stock or in­vest­ing in com­pa­nies that the Fed over­sees, reg­u­lates and su­per­vises with­out any ex­cep­tions or waivers.

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