(Reuters) - The Democratic Party is poised to adopt a policy platform at its convention next week that would prohibit bankers from serving on the boards of the Federal Reserve’s 12 regional headquarters and would aim to make the U.S. central bank more diverse.
The reforms, if implemented, would shake up a long-standing Fed structure that has come under fire from critics who say it is opaque, favors banks, and leads to the selection of insiders and others to top posts who poorly reflect the country’s diversity of race, gender and background.
By law, three of the nine directors at each regional Fed branch are representatives of banks in the district. Those three do not take part in work on financial regulation or in the selection of the presidents of the Fed banks, who participate, on a rotating schedule, on the Fed’s committee that sets U.S. policy on interest rates.
The platform, dated July 21, says: “We will also reform the Federal Reserve to make it more representative of America as a whole, and we will fight to enhance its independence by ensuring that executives of financial institutions are not allowed to serve on the boards of regional Federal Reserve banks or to select members of those boards.”
The platform was approved by the party’s committee earlier this month and its delegates are expected to formally adopt it at the Democratic convention in Philadelphia next week, where Hillary Clinton is expected to be named the party’s nominee for the November presidential election.
The Federal Reserve declined to comment. Fed Chair Janet Yellen has faced questions from lawmakers about the structure over the last couple of years, and she and her colleagues, while open-minded to possible changes, have generally said the current structure works.
“I’d worry about losing their voice,” Patrick Harker, president of the Philadelphia Fed, said of community bankers on his board when reporters asked him last week about the criticisms.
“They are giving us insight beyond monetary policy that actually is important to our mission,” Harker said, noting he meets with his directors every two weeks or so.
The Democrats also said in the platform that they will “protect and defend” the Fed’s independence to target full employment and low inflation “against threats from new legislation.”
Reporting by Jonathan Spicer; Editing by Leslie Adler