May 31, 2011 Reading Time: < 1 minute

“Mr. Frank’s bill is simple and remarkably short by Washington standards: two pages. It would strike the language in Section 12A of the Federal Reserve Act that provides for voting membership by the New York Fed and rotating voting membership by the other 11 Federal Reserve banks on the Federal Open Market Committee (FOMC).

Monetary policy is currently set by the seven politically appointed members (governors) of the Fed Board in D.C. and five of the 12 regional presidents. The FOMC is thus already dominated by political appointees. In the past, some governors had strong credentials in the banking or economics profession. They provided independent voices in policy setting and would oppose a Fed chairman. This has been less true over time. Today Fed governors reliably vote with the chairman.

Dissent, if any, will now come from the regional bank presidents. But not just dissent. They can also provide a Fed chairman with the votes needed to conduct good policy. Paul Volcker’s anti-inflation policy in the late 1970s and 1980s was importantly backed by the presidents on the FOMC.” Read more.

“Barney Frank’s Latest Bad Idea”
Gerald P. O’Driscoll Jr.
Wall Street Journal, May 5, 2011.

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Tom Duncan

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