Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said he sees no conflict of interest arising from the fact that bankers serve on the boards of the regional Fed banks.
“Isn’t it wrong, these critics say, to give bankers power over those who are supposed to supervise them?” Kocherlakota said in the text of prepared remarks today in Minot, North Dakota. “It would be wrong if that were the case, but members of the board of directors -- bankers or not -- have no say in how Federal Reserve banks conduct their supervisory operations.”
U.S. lawmakers including Senator Bernie Sanders of Vermont want to ban bank employees from regional Fed boards, warning about conflict of interest. Such representation came under scrutiny after JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, a board member at the New York Fed, revealed in May what is now estimated to be at least $5.8 billion in trading losses.
Sanders, an independent, introduced legislation in May that would bar employees of bank holding companies or other firms regulated by the Fed from serving on the boards of the 12 regional Fed banks.
Bankers provide regional Fed bank presidents with information about credit conditions and the economy, which is “precisely the kind of information that policy makers need to do their job,” Kocherlakota said.
The Minneapolis Fed chief didn’t comment on the economy or the outlook for monetary policy in his prepared remarks. He is not a voting member of the policy-setting Federal Open Market Committee this year.