U.S. Senator Bernie Sanders will reintroduce legislation that would remove banking executives from the board of directors at each of the 12 Federal Reserve regional banks.
“Allowing Wall Street CEOs to serve as Federal Reserve directors and hand-pick its members and staff is a clear example of the fox guarding the henhouse,” Sanders, an independent from Vermont who caucuses with Democrats, said in a statement today in Washington.
Congress created the Fed nearly a century ago with a mix of public and private features, including regional banks with private banking executives on their boards of directors. The structure of the central bank came under scrutiny for its ties to Wall Street as the Fed bailed out banks during the financial crisis and last year when JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon was serving on the board at the New York Fed when his bank announced a trading loss.
Dimon’s term as a director at the New York Fed expired on Dec. 31. A replacement has not yet been named. The trading loss at JPMorgan is calculated at exceeding $6.2 billion for the first nine months of last year.
“Dimon was the poster child for why we need to end the serious conflicts of interest at the Fed, but he was not alone,” Sanders said. “Two-thirds of the directors at the New York Fed are hand-picked by the same bankers that the Fed is in charge of regulating.”
Sanders first introduced the legislation last year with Senators Barbara Boxer of California and Mark Begich of Alaska as cosponsors.
The 12 regional Fed banks each have a nine-member board of directors. Six of those directors are appointed by banks that are members of the Federal Reserve System. The remaining three are appointed by the central bank’s Board of Governors in Washington.
By contrast, the Fed’s governors, including Chairman Ben S. Bernanke, are political appointees, nominated by the president and confirmed by the Senate.
The legislation would make all nine directors at each Fed regional bank appointed by the Board of Governors, and employees of any firm regulated by the Fed would no longer be eligible for appointment as directors.