Fed Bank selection process called secretive

The Federal Reserve Bank of Dallas is looking for a new president. Its board of directors hasn’t said who’s being considered or interviewed, or even if it’s close to making a decision. There has been no direct public input.

Critics say the Fed’s regional banks are secretive about how they choose officials who help set U.S. interest rates.

“It should cost the system nothing to be more open,” said Adam Posen, president of the Peterson Institute for International Economics in Washington.

The law governing the Fed allows the boards of the 12 regional banks — who say they’re exempt from sunshine laws because they aren’t government officials — to pick their presidents. The law says nothing about the transparency of the process or what qualifications a president should have.

The boards often choose presidents through a process entirely behind closed doors. In contrast, the seven members of the Fed’s Board of Governors are selected through a process that involves nomination by the president and confirmation by the Senate.

Jerome Powell, a member of the Fed board who heads its committee on reserve bank affairs, said it’s “a fair question” whether the selection process could be “more transparent.”

Calls for openness are gaining momentum in Congress, where lawmakers from both parties are considering measures to change the structure of the U.S. central bank.

“The Federal Reserve System is more than a century old,” Sen. Richard Shelby of Alabama, the Republican chairman of the Senate Banking Committee, said in an email. “Congress should review its expansive structure and authorities, including the selection process for appointing regional presidents.”

The Banking Committee, which oversees the Fed, has approved legislation that would create a commission to make recommendations on restructuring the central bank system.