Dean Baker: Democracy vs Bankers at the Fed

[dameocrat67]

However, the other 12 members of the FOMC are not appointed by democratically elected officials. They are the 12 regional bank presidents. While the process of selecting the regional bank presidents is somewhat complicated, it is largely controlled by the banks within a region. This means that 12 of the 19 members of the FOMC are selected by the banks. At any point in time, only 5 of the 12 bank presidents have a vote. This gives the governors a 7-5 majority among the voting members, even though they are outnumbered 12-7 on the FOMC as a whole.

Most of the time decisions by the FOMC are unanimous. The FOMC typically discusses the current economic situation for 2-3 hours and considers possible actions. By the time a vote is called everyone has expressed their opinion so the outcome is already known. In the interest in showing support for the Fed, most members agree to support the majority decision to make it unanimous. Occasionally, one member will make a point of dissenting to show that he or she felt strongly about the issue being considered.

The last two meetings of the FOMC were extraordinary in that they featured not one, but three dissents. Furthermore, it was striking that all three dissents came from the bank presidents who were appointed by the banking industry.

The immediate issue at hand is whether the Fed should be trying to do more to boost growth and create jobs. The five governors (there are two vacancies) appointed through the democratic process all felt that it was important to do more to generate jobs. This was a bipartisan sentiment. Three of these members were appointed by President Obama, one was appointed by President Bush, and one (Chairman Bernanke) was appointed by both...............

http://www.huffingtonpost.com/dean-baker/democracy-versus-bankers_b_1016248.html


I thought this was a short well written article that explains the problems with the Federal Reserve for a liberal point of view.

[girl gone mad]

1. k & r

[chill_wind]

2. Just excellent: 'An overhaul of the Fed is long overdue.

It should be turned into a body that directly answers to Congress just like every other regulatory agency. And the bankers must go. This would be a great way to mark the Fed's 100th anniversary in 2013. We can make it an institution that is consistent with democracy.'

k & R.