Wednesday, March 17, 2010

Will Dodd's Proposed Reforms Reduce The Power Of the Regional Feds?

So, in the office I post on Obama's picks for the Fed and comment on the district/regional bank presidents, only to come home and find a front page story in WaPo on Senator Dodd's proposal to reduce the power of the regional banks and their presidents. Apparently he wants to take away their power to regulate banks in their districts, although the power of the New York Fed and a body to be set up at the Board of Governors, although not under its control, would take over this supervisory role. Also, the New York Fed president would become a presidential appointee. I saw nothing altering the role of the regional bank presidents on the FOMC, where all of them report on conditions in their regions during the meetings, and five of them vote on policy.

Actually I am not impressed by this proposal. The argument of their defenders that they will have better knowledge of their regions if they supervise their local banks makes sense to me. Also, they are the ones that actually operate the discount windows that lend to the banks in their regions. Again, they will know better about this lending if they know what is going on with those banks. This proposal looks just plain silly to me, frankly.


Myrtle Blackwood said...

Would this proposed action simply be putting the official stamp on the current reality. That the power actually lies already in Washington?

Barkley Rosser said...

It would accentuate it further.