WASHINGTON (Reuters) - A senior Democratic senator has introduced legislation that would make the head of the New York Federal Reserve Bank a presidential appointee subject to Senate confirmation.
The bill by Rhode Island Senator Jack Reed, an influential voice on the Senate Banking Committee, comes ahead of a committee hearing on Friday at which New York Fed chief William Dudley will be the main witness.
The head of the New York Fed plays an outsized role compared to the presidents of the 11 other Fed regional banks, with a permanent voting spot on the central bank’s monetary policy committee and responsibility for carrying out the Fed’s main monetary operations.
The New York Fed also oversees some of the nation’s largest financial institutions, and has been questioned in recent years for failing to look with enough rigor at the operations of companies like JPMorgan. The hearing on Friday will address the question of whether Fed regulators may be too soft on the banks they oversee.
“Someone at this institution needs to be directly accountable to Congress,” Reed said in a statement. “This legislation is about holding the New York Fed accountable ... It’s just too powerful to be left unchecked.”
Like other regional Fed banks, the president of the New York Fed is appointed by the regional bank’s board of directors, subject to the approval of the Fed’s Washington-based board.
The idea of making the job a presidential appointment is not a new one: with Reed’s support it was included in the Senate’s version of Wall Street reform legislation in 2010, although it was not included in the final Dodd-Frank law.
Reed’s bill shows the central bank is set to come under increased scrutiny from both the left and the right, given that the Republicans who will control both the House and the Senate next year have been particularly critical of Fed policies.
(The story was refiled to add a dropped word to make clear reference to New York Fed in sixth paragraph)
Reporting by Howard Schneider; Editing by Andrea Ricci