Two Federal Reserve policymakers plan to warn U.S. lawmakers against changing the Fed’s structure to reduce the role of private bankers at the U.S. central bank, according to statements seen by Reuters.
Some Democrats, including the campaign of Democratic presidential candidate Hillary Clinton, have advocated for removing private bankers from the boards of regional Federal Reserve banks.
But Fed officials say private bankers offer insights on the nation’s economy and a check on central authority in Washington.
“The Fed’s public-private structure supports monetary policy independence,” Richmond Fed President Jeffrey Lacker said in a statement for a House of Representatives committee hearing scheduled for Wednesday.
The Fed was created in 1913 to include a board of Washington-based federal officials as well 12 regional Federal Reserve banks that are technically owned by private banks.
Private bankers sit on the boards of the Fed’s regional branches, although they are not in the class of directors that help choose the regional Fed presidents, who can vote on Fed interest rate policy and must be approved by the Washington-based board. The U.S. president picks board members in Washington who are approved by the Senate.
Lacker was due to attend Wednesday’s hearing with Kansas City Fed President Esther George, who also submitted a statement defending the role of private bankers in the Fed system. Neither Lacker nor George commented on the outlook for the U.S. economy or monetary policy.
Changing the Fed to be a wholly public institution would risk “putting more distance between Main Street and the nation’s central bank,” George said in a statement.
While Fed officials disagree on interest rate policy they tend to stand more united against proposals that might compromise their independence.
Republican presidential candidate Donald Trump on Monday accused the Fed of creating a “false economy” by keeping interest rates low.
Source: Reuters (Reporting by Jason Lange; Editing by Meredith Mazzilli)