Mester Says Fed Structure Works Well and Shouldn’t Be Altered

Federal Reserve Bank of Cleveland President Loretta Mester said she doesn’t favor altering the balance of power on the central bank’s policymaking panel, rejecting a proposal from the Dallas Fed that’s winning attention from lawmakers.

“The current structure has worked, I’m going to say, pretty well for 100 years,” Mester said Monday during an audience question-and-answer session after delivering a speech in Washington. “I would leave it alone.”

She is latest insider to weigh in on whether the U.S. central bank needs reform amid congressional calls for greater Fed transparency. San Francisco Fed President John Williams and Chicago’s Charles Evans both said last week they thought the current system works and has served the national interest.

Dallas Fed President Richard Fisher, who steps down March 19, has used his remaining time in office to promote an overhaul that would reduce the power of the New York Fed and distribute more influence to the system’s 11 other regional banks on the policy-making Federal Open Market Committee.

Fisher’s plan would, among other things, strip the New York Fed of its permanent vote on the Federal Open Market Committee in favor of an equal vote rotation among all 12 regional reserve banks. Currently, the 11 other regional bank heads rotate into voting seats on the FOMC, with Chicago and Cleveland voting every other year and the rest every third year.

Senate Banking Committee Chairman Richard Shelby, the Alabama Republican who held a hearing last week on the Fed, has said he is looking “very strongly” at Fisher’s proposal.

The Fed was established by Congress in 1913. Its structure and operations have been updated several times since, including in 1933 when the FOMC was created.

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