Reed renews call to oversee New York Fed

By J. Preston Carter, J.D., LL.M.

 

Senator Jack Reed (D-RI) has reintroduced legislation intended to increase Congressional oversight and accountability of the Federal Reserve Bank of New York. The bill was originally introduced last November in the wake of a report that the New York Fed failed to raise a red flag over complex trading of credit derivatives at JPMorgan Chase. Reed also had added similar legislation in the Senate-passed version of the 2010 Dodd–Frank Act, but the language was not included in the final version of the law, a move Reed has called “a crucial mistake.”

 

Reed’s bill would require Senate confirmation of the president of the New York Fed, as well as annual testimony before the Senate Banking Committee and the House Financial Services Committee. According to Reed, the Senate confirmation process “could give the Senate an opportunity to evaluate whether a nominee has the experience, character, judgment, and skills to serve effectively as one of the most powerful banking regulators in the country, if not the world’s.”

Unique responsibilities. The New York Fed differs from the other Reserve Banks in that it is entrusted with unique responsibilities, such as:

• The president of the New York Fed is a permanent member of the Federal Open Market Committee, which sets the Fed’s monetary policy, and acts as the Committee’s vice-chairman.
• The New York Fed is entrusted with protecting the U.S. dollar in foreign exchange markets.
• In terms of assets and volume of activity, the New York Fed is the largest Reserve Bank, and it is charged with supervising some of the largest banks and most active financial institutions in the country. 

“If the Governors of the Federal Reserve System are required to be confirmed by the Senate, then the President of the Federal Reserve Bank of New York, who played a central and perhaps more powerful role in overseeing taxpayer dollars during the financial crisis, should also be subject to public scrutiny,” said Reed. “It is past time that we add meaningful layers of accountability so that we can be better assured of the New York Fed’s ability to address potential financial pitfalls in advance.”



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