Dallas Fed chief urges power shift at bank

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The outgoing head of the Dallas Federal Reserve called Wednesday for major changes to the central bank’s power structure, arguing that current policies fuel perceptions that big banks have too much influence with regulators.

During a fiery speech to the Economic Club of New York, President Richard Fisher criticized the current structure, arguing that authority should be more equally distributed between the Fed’s 12 regional banks.

Meanwhile, Fisher urged steps to take away power from the New York Federal Reserve, which has long been seen as a dominant Fed force, in part because of its proximity to Wall Street.

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"We at the Fed must fully and frontally address the concern of many who feel that too much power is concentrated in the New York Fed," Fisher said during the remarks in Wall Street’s backyard.

The New York Fed president, a post currently filled by William Dudley, has a permanent vice chairmanship on the Fed's policymaking committee — the Federal Open Market Committee (FOMC) — which is charged with setting monetary policy.



"[That] renders him the second-most powerful person at the table, behind the chair," Fisher said. "Having the New York Fed president as the FOMC’s vice chair gives the appearance of a conflict of interest. To correct this, I would rotate that position every two years to one of the other 11 Fed presidents."



Fisher's speech was unusual in that a current official is proposing structural changes to the central bank. And it comes as lawmakers in Congress on both sides of the aisle are pressing the Fed on transparency issues. 



Fisher and other Fed officials oppose a proposal put forth by Sen. Rand PaulRandal (Rand) Howard PaulA Senator Gary Johnson could be good not just for Libertarians, but for the Senate too Conservatives left frustrated as Congress passes big spending bills Senate approves 4B spending bill MORE (R-Ky.), whose Audit The Fed bill would allow a full review of its records and how it reaches it financial policymaking decisions.



“This secretive government-run bureaucracy promotes policies that have impacted the lives of all Americans,” Paul said last week. “Citizens have the right to know why the Fed’s policies have resulted in a stagnant economy and record numbers of people dropping out of the workforce.”

Though he doesn’t support that proposal, Fisher said that central bank officials would be unwise not to listen to criticism of the Bank's transparency.

"I don’t think the Fed is getting the message," he said. "In this era of social media and über-transparency, we at the Fed need to learn to speak English, rather than 'Fedspeak.' I have done my level best during my tenure at the Fed to speak plainly, always bearing in mind that when I speak as a Fed official, I am speaking to the American people whom we serve, not to a small group of economists or just to the mavens of Wall Street."

Fisher also proposed giving regional Federal Reserve Banks more power in regulating big banks, a job that the Fed's Board of Governors currently carries out by overseeing systematically important financial institutions (SIFIs).



Critics of this approach have pointed to concerns over Washington’s “revolving door," through which former bank officials step into jobs as Wall street regulators and vice versa.

"A simple solution would be to have each of the SIFIs supervised and regulated by Federal Reserve Bank staff from a district other than the one in which the SIFI is headquartered," Fisher said in his speech.

Fisher said that it "might eliminate any perception of conflicted interest."

He reiterated his push to have the Fed chairman give a press conference after each FOMC meeting.

Under current procedure, the Fed chair gives a press conference once per quarter. Fed-watchers listen to every word during the press conference for clues on the bank's policies. Often times these press conferences move markets.

Fisher said that more press conferences would "both add transparency and give the FOMC greater leeway in implementing policy."