Rep. Frank seeks to replace regional bank presidents on FOMC

House Financial Services Committee ranking member Barney Frank (D-Mass.) on Tuesday proposed new legislation that would remove the five regional Federal Reserve bank presidents who vote on monetary policy decisions on the Federal Open Market Committee (FOMC), and replace them with five new participants chosen by the president and confirmed by the Senate.

Frank's bill is a response to his complaint that the five rotating regional bank presidents who now serve on the FOMC are not democratically elected. Frank argued in October that these bank presidents participate on the FOMC "with nothing remotely resembling public participation" in how they are selected.

The bill, H.R. 3428, would replace the five regional bank presidents with five other members who are appointed and confirmed, just as the other seven members of the FOMC are. The seven others are members of the Federal Reserve Board of Governors.

Under the bill, the five new members must be "selected by the President to give due regard to a fair representation of the financial, agricultural, industrial, commercial, consumer and labor interests, and geographic diversity." These members would have staggered seven-year terms.

Frank said in October that while financial interests should have a say in monetary policy decisions, the Federal Reserve has a dual mandate of keeping inflation low and maximizing employment. He said such a heavy representation from the banking system "gives a bias" against the unemployment mandate, since "the record shows the regional bank presidents tend to be concerned more, on the whole, about inflation than unemployment."

The bill represents a refining of Frank's thinking on how to restructure the FOMC. A bill he introduced in April, H.R. 1512, would allow the five regional bank presidents to participate in FOMC discussions but would not let them vote, and would leave voting to the seven members of the Board of Governors.

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