Home > #OWS, finance, news > Who should be on the Fed Bank Boards? #OpenFed

Who should be on the Fed Bank Boards? #OpenFed

June 20, 2012

Please consider this a civic duty: nominate someone for one of the Fed Bank Boards.

Why? Because:

  • these guys regulate the banks,
  • they also decide on and implement monetary policy (things like interest rates),
  • in times of trouble they also help bail out banks (think Tim Geithner, Lehman, and Bear Stearns)
  • the current process is an old boy’s network.

If you haven’t been living under a rock, you might have heard that Jamie Dimon, the CEO of JP Morgan Chase, sits on the NY Fed Board. There have been a number of calls for his resignation or removal. But as Jonathan Reiss points out in this excellent Huffington Post piece, even better than removing Jamie Dimon and leaving it at that would be to call for all of the Fed Boards to be populated with people who represent the interests of 99% rather than their own narrow business interests. From his article:

…rather than complaining about individual cases, we should fix the process that appointed Dimon and will appoint his successor and 35 other directors to 3-year terms starting January 2013. There are systemic problems with how the directors are selected. The Government Accountability Office studied the bank boards and found they were neither diverse nor representative of the public despite a mandate requiring it. If we work now, this process can be greatly improved.

Did you hear that? The rules already stipulate diverse boards! From a Time article which picked up Reiss’s:

The fact is, the 1913 law creating the central bank was structured to avoid these conflicts. The Federal Reserve System is made up of 12 regional banks, each with nine board members — three of each of three “classes,” A, B, and C. Class A directors are to be from the banking industry and represent large, medium-size, and small banks. Both Class B and Class C directors are supposed to represent non-banking interests — labor, consumers, agriculture, and the like. But bankers select the Class B directors, and the governors of the Federal Reserve select the Class C members, in theory to help ensure their complete independence from the banking industry.

How well does the theory work? Take a look at the list of people on the NY Fed Board, in class C (ignoring classes A and B for now):

Lee C. Bollinger (bio) Chair, 2012
President
Columbia University

Kathryn S. Wylde (bio) Deputy Chair, 2013
President and Chief Executive Officer
Partnership for New York City
Emily K. Rafferty (bio), 2014
President
The Metropolitan Museum of Art

A bit of background on Kathryn Wylde can be found here, where she was quoted defending Wall Street and trying to shame someone else into doing the same; the article calls for her resignation from the NY Fed. All three of them: Lee Bollinger, Kathy Wylde, and Emily Rafferty, are professional fundraisers. Which means they grovel at the feet of rich people (read: bankers) for a living. This is not the definition of representing “non-banking interests — labor, consumers, agriculture, and the like” I would come up with. In fact if I came up with a definition, there’d be a “no ass-kissing” stipulation.

Is this a problem just for the NY Fed? And why is it happening? According to Reiss:

Dodd-Frank commissioned a study of the bank boards of directors by the GAO. They found in 2010 of the 108 directors, only 5 represented consumers. Agriculture and food processing was better represented. Curiously, the GAO says that several reserve banks said it was “challenging” to find qualified consumer representatives who are interested in these positions. They attributed this to low pay (relative to corporate boards), restrictions on political activity and the requirement that they divest themselves of bank stock holdings. But I find it hard to believe that is the problem.

This is where you come in.

Reiss wants you to nominate qualified people for the local Fed Boards. He’ll compile the list and send them on to the reserve banks, since they seem to be having trouble finding qualified consumer advocates (for whatever reason they are only friends with rich bankers and their fans).

Some good news, the turnover is pretty high: the terms are three years, staggered, which means all 12 Fed Banks make 3 new appointments every year, and by custom nobody serves more than 2 terms. That means that within 6 years we could have a fairly representative board in each Fed if we do this right.

Tweet your nomination to the hashtag #OpenFed.

Categories: #OWS, finance, news
  1. suevanhattum
    June 20, 2012 at 8:43 am

    I nominate Mary O’Keeffe (http://bedbuffalos.blogspot.com/).

    • OpenFedGuy
      June 20, 2012 at 12:03 pm

      Thanks for the nomination.

      Please tweet this name with hastag #OpenFed. I’m not going to be able to compile across multiple blogs that pick this idea up. I’m relying on twitter to do that. If you can’t tweet, you can e-mail openfed@anasyn.com. But tweeting it best because this should be an open process.

  2. June 20, 2012 at 10:06 am

    What are the minimum qualifications to be reasonably considered? Since working for a bank pretty much makes you a banker, it seems tough to find someone who really understands banking yet is not a banker. It’s almost like trying to nominate an athiest for Pontiff. You’ve said it yourself -“economists don’t understand the financial system” http://mathbabe.org/2012/02/29/economists-dont-understand-the-financial-system/ If economists don’t get it, who does that leave?

    • June 20, 2012 at 10:08 am

      It’s not all about understanding the financial system – it’s not a game of cleverness. It’s more about, when someone says “we need to keep rates low”, someone else asks, “how is that going to affect normal people and why?”. In other words, an intelligent, consumer-oriented person who is unafraid of technical things could do this job well. If the answer involves things that are too complicated for an educated, intelligent, and interested person to understand, then don’t do it.

  3. June 20, 2012 at 10:15 am

    The seclection method as established is good but the flaw lies in that all selections need to be CONFIRMED by the US Senate with FULL Transparency.
    And again, “We the people” are responsible and not fulfilling our duty by not ELECTING only those who will honor our duty.
    We need to elect only those who will use as their guide, “Don’t End The Fed, Amend The Fed” Challenge it, Improve, and then in this government that is “governed by the people”,
    we must use it as our guide.

    ( http://bit.ly/MlQWNs ) Excerpt from…

    ” PLEASE, read the Federal Reserve Act? The authorizing legislation projected a body:

    “…to provide for the establishment of the Federal Reserve banks…

    Where we went wrong- established Federal Reserve Banks owned by private banks, domestic and foreign.
    How we can fix it-establish Federal Reserve Banks owned “by the people,of the people,for the people

    … to furnish an elastic currency…

    Where we went wrong-the elastic currency’s quality and quantity can be controlled by private banks using a legalize counterfeit system called Fractional -Reserve Banking.
    How we can fix it- end Fractional Reserve Banking making the correctly established Federal Reserve Bank the ONLY supplier of new currency.

    … to afford means of rediscounting commercial paper and to establish a more effective supervision of banking in the United States..

    Where we went wrong-allowing private banks to charge compound interest on the paper they create “out of thin air”.
    How we can fix it-private banks will only be allowed to invest, or purchase assets with 100% margin.They will be responsible for all
    losses and entitled to all gains.

    … and for other purposes.”

    Where we went wrong-By now can we identify the operative phrase? Of course: “for other purposes.”

    How to fix it-for the purposes of FUNDING, ““We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,…””

    • June 20, 2012 at 10:16 am

      Please, please please don’t use the caps lock. It is distracting.

      • June 20, 2012 at 4:57 pm

        Sorry , for the distraction. I have little to no talent for communicating using this most wonderful recent benefit for mankind to find thruth and knowledge at such a rapid speed.
        “Social Media”
        I seek your help as well as anyone else willing, to read , challenge, and improve. and then,”***** “Believe nothing merely because you have been told it…But whatsoever, after due examination and analysis,you find to be kind, conducive to the good, the benefit,the welfare of all beings – that doctrine believe and cling to,and take it as your guide.”- Buddha[Gautama Siddharta] (563 – 483 BC), Hindu Prince, founder of Buddhism

        http://bit.ly/MlQWNs

  4. OpenFedGuy
    June 20, 2012 at 12:11 pm

    Regarding qualifications, as Cathy notes above, it does not require deep understanding of the banking system. It requires basic appreciation of economics and how monetary policy and bank regulation affects people.

    The Fed, and the law, agree with this. Once in a great while they do appoint someone like the president of a food bank or a labor leader. So, clearly they deem such people to be qualified.

    There are many people working to improve the financial system who are not bankers. We need to get more of these people on the federal reserve bank boards as the law says.

    The fed says it is “challenging” to find them. They need our help.

    Please tweet with hashtag #OpenFed
    or (distant second choice) e-mail OpenFed@anasyn.com.

  5. OpenFedGuy
    June 20, 2012 at 1:28 pm

    Cathy’s post is great. I do have one quibble. I should happen much faster than six years.

    1) Within seven months we can replace 1/3 of the directors
    a. While they often reappoint people for a second term, there is no reason they need to.
    b. At a minimum 1/6 of the slots in seven months including the NY chair (Bollinger is ending his second term).

    2) As soon as they start to take a different approach to appointments, existing directors will start to feel they need to shape up. (I’ve seen this work elsewhere).

    3) By January 2015, more than half the directors will be new and, we hope, much better public representatives. That’s 2 ½ years, not 6.

    4) Admittedly, it may take until January 2018 (5.5 years) for a complete revamp, but…

    most of the improvement can happen MUCH FASTER…

    IF WE GET OUR ACT TOGETHER

    (sorry Cathy, I think the caps were useful).

  6. June 20, 2012 at 5:08 pm

    Anyone that reads : William Black, “The Best Way to Rob a Bank is to Own One”
    : Anything Michael Hudson has written. “How the banks have betrayed …”

    should qualify,

    but only after the Federal Reserve Act is amended, i.e. no longer a private for profit bank owned by some of the largest US and (believe it or not) foreign banks.
    So, I guess I such add, “Must be US citizen.”

    P.S. Add “Web of Debt” by Ellen Brown,
    and perhaps a fool that asks foolish questions in hope of getting profound answers-
    Google: “justaluckyfool”

  7. Matt
    June 21, 2012 at 11:43 am

    MathBabe for FedBoard!!!!

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