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CORRECTED-New York Fed in crosshairs of Senate Banking Committee
March 14, 2015 / 3:20 AM / 3 years ago

CORRECTED-New York Fed in crosshairs of Senate Banking Committee

(Corrects paragraph 10 to show Beacon Policy Advisors is a research and not a lobbying firm)

By Michael Flaherty

WASHINGTON, March 13 (Reuters) - The Senate Banking Committee is zeroing in on the New York Federal Reserve Bank in its reform effort aimed at the U.S. central bank.

And while the New York Fed is a common ground in political attacks on the U.S. central bank, Republicans and Democrats have yet to agree on what changes to impose.

Committee Chairman Richard Shelby discussed the structure of the New York Fed with Fed Chair Janet Yellen in a meeting this week, a Senate Banking aide said on Friday.

Shelby appears more interested in structural reform than a full audit of the central bank. The Alabama Republican has expressed interest in a plan by the outgoing Dallas Fed president that includes stripping the New York Fed of its permanent vote on policy and transferring Wall Street oversight from New York to other regional banks.

Senator Sherrod Brown, the committee’s top Democrat, does not support the Fisher plan.

“I don’t know what re-arranging the chess pieces does,” Brown said. “I don’t think that really changes the Fed that much.”

Instead, Brown backs a bill to have the New York Fed president become a White House appointee requiring congressional approval.

“If that’s a place the chairman wants to go, that’s the kind of thing that maybe we can discuss,” Brown said, referring to the bill.

The seven Washington-based Fed governors are White House appointees and confirmed by Congress. The Fed’s 12 regional bank presidents are chosen by their own boards. Eleven of the banks rotate into voting positions on the Fed’s policy-setting committee. New York has a permanent vote given the large role it plays overseeing Wall Street.

“I think they want to formally remove more power from the New York Fed and give it to the board,” said Brandon Barford, a partner at research firm Beacon Policy Advisors, referring to the Senate Banking Committee.

The New York Fed has come under increased pressure from lawmakers who say the bank is too cozy with Wall Street, a claim that gained attention from leaked tapes last fall.

Another item on Shelby’s agenda so far this year is regulatory relief for small banks, an idea Democrats support as long as the relief does not ease restrictions on large banks.

“The goal is to do one package covering all areas,” the Senate Banking aide said.

Reporting by Michael Flaherty

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