–Warns Bill Would ‘Politicize’ Fed
–Urges 13 Senators in Eighth District To Back McCaskill Amendments

By Steven K. Beckner

(MNI) – St. Louis Federal Reserve Bank President James Bullard
warned that sections of a Senate financial regulatory reform bill would
“politicize” the Fed in a letter to 13 senators in his district.

And Bullard urged the Senators to back amendments offered by Sen.
Claire McCaskill, D-Mo., which he said would limit “severe restrictions
on the Fed.

Bullard warned that, as currently written, Section 1157 of Senate
Bill 3217 “would lead to the politicization of the Federal Reserve by
requiring presidential appointment and Senate confirmation of the
president of the New York Federal Reserve Bank.”

“This action would elevate the New York Bank to a level equivalent
to the Board of Governors in terms of political appointments and, thus,
might limit the role of the Board of Governors in overseeing the actions
of the Bank,” he said. “It also would introduce an unprecedented level
of political intervention in the operation of a Reserve bank.”

What’s more, Bullard said that same section of the financial
regulatory reform bill “would severely restrict the ability of all
Reserve banks to attract high-quality executives from the private sector
to be Reserve bank directors.”

“This section of the bill would prohibit anyone from a company,
subsidiary or affiliate of a company supervised by the Federal Reserve
to vote for Reserve bank directors and would prohibit any past or
current officer, director or employee of such entities to serve as a
director on the board of a Reserve bank.”

“This would mean, for example, that all three current Class A
directors on the St. Louis Bank’s board would no longer be eligible to
vote for, or be re-elected as, board members,” he added.

Bullard urged the 13 senators who represent states in the Fed’s
eighth district to support two “thoughtful” McCaskill amendments which
he said would remedy “severe restrictions to Federal Reserve governance
contained in the bill.”

One McCaskill amendment, number 4028, would simply delete all of
the current language in section 1157, and Bullard said this “seems the
more reasonable, given the passage of Sen. Bernie Sanders’ amendment to
S. 3217, which would require a GAO audit of all the Reserve bank boards
and their governance, including review of potential conflicts of
interest.”

“Upon conclusion of these audits, Congress would have a better
gauge on what action should be taken to address any governance
shortfalls,” he said.

A second more moderate amendment, number 4027, would change the
section 1157 language so that it only affects the Federal Reserve Bank
of New York by removing the presidential appointment requirement,
requiring the Board of Governors to select six of the nine New York
directors and making current directors, officers and employees of
systemically important banks ineligible to vote for or be a director of
the New York Bank.

Bullard wrote that “striking section 1157 altogether, is
preferable. However, either amendment would address the further
politicization of the Fed. I hope you will support one of them.”

** Market News International Washington Bureau: 202-371-2121 **

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