Richard Fisher, who is one of the most well-known members of the Federal Reserve, will be stepping down next month as president of the Dallas Fed after 10 years. He delivered his final speech to a New York audience Tuesday in which he called for a series of reforms for the century-old United States central bank.
For years, the Fed has been accused of conflict of interest on numerous occasions because of the revolving door between Washington, the Fed and Wall Street. According to Fisher, the central bank must modify its policy making and banking supervision guidelines in order to assuage and appease the critics and detractors.
Although the central bank is concentrating its efforts on whether or not it should raise interest rates this summer, Fisher recommended that the Fed take up a number of considerations, too. Here are the suggestions:
- The New York Fed’s permanent vote on policy should be rotated every two years.
- Transfer oversight of Wall Street financial institutions to supervisors from one of the other 11 district Fed banks.
- Six of the 12 regional Fed presidents should vote on monetary policy next to six Fed governors in Washington with the Fed chair having the tie-breaker vote.
- Utilize the Trimmed Mean PCE as an alternative to measuring inflation (it omits extreme volatile price points when it measures inflation numbers).
“I’m seeking to satisfy the Congress from the standpoint of the fact that New York is viewed very suspiciously,” said Fisher in his remarks. “Well, let’s fix that up a little bit. It’s not going to kill the open market committee to have the vice chair rotate.”
Fisher posited that these types of changes would prevent Washington from trying to impose itself upon monetary policy. Embarking upon such reforms would likely eliminate Congress from having 12 Fed member candidates go through the Senate confirmation hearings, which would make monetary policy really politicized, says the exiting Fed bank president.
Ostensibly, when Fisher speaks of Congress he is likely referring to the Audit the Fed movement that has been revived by Kentucky Republican Senator and possible 2016 presidential candidate Rand Paul, echoing his father’s sentiments about the U.S. central bank.
Fisher averred that Fed members need to understand that there is a perception out there that “power is concentrated in the New York Fed,” adding he realizes there are unscrupulous suspicions regarding the New York Fed because it swayed a lot of power throughout the financial crisis.
He also mentioned that the Fed shouldn’t delay a rate hike amid weak inflation levels.
The Wall Street Journal opined by allocating greater oversight throughout the west and south would encourage certain lawmakers, like Senate Banking Chairman Richard Shelby and House Financial Services Chairman Jeb Hensarling, to support the mandate from the Fed and refrain from attempting to be a part of the interest rate discussions and money-printing talks.
Central bankers have lambasted the Audit the Fed initiative. Fed governor Jerome Powell identified as misguided, Philadelphia Fed President Charles Plosser called it dangerous and Dallas Fed President Richard Fisher essentially labeled it as unnecessary.
Last month, Senator Paul introduced legislation that would increase congressional oversight of the central bank’s monetary policy directives. The bill, which consisted of 30 co-sponsors, would order the comptroller general to perform an audit within one year of the legislation’s enactment and to release the results of its findings to Congress.
A similar bill was passed in the House during the last session, but it died in the Democratic-controlled Senate. Massachusetts Democratic Senator and potential 2016 presidential candidate Elizabeth Warren, who was a staunch critic of the Fed, now opposes an audit of the Fed because it can pose harm to monetary policy.
“I strongly support and continue to press for greater congressional oversight of the Fed’s regulatory and supervisory responsibilities, and I believe the Fed’s balance sheet should be regularly audited – which the law already requires,” Ms. Warren said in an emailed statement. “But I oppose the current version of this bill because it promotes congressional meddling in the Fed’s monetary policy decisions, which risks politicizing those decisions and may have dangerous implications for financial stability and the health of the global economy.”
It was previously discovered that Warren is making exponential earnings on Wall Street.