[Congressional Record Volume 161, Number 30 (Monday, February 23, 2015)]
[Senate]
[Pages S1032-S1033]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. REED:
  S. 530. A bill to require the president of the Federal Reserve Bank 
of New York to be appointed by the President, by and with the advice 
and consent of the Senate; to the Committee on Banking, Housing, and 
Urban Affairs.
  Mr. REED. Mr. President, I am reintroducing legislation that would 
require the head of the Federal Reserve Bank of New York to be 
appointed by the President and confirmed by the Senate.
  In 2010, I worked to include a provision with similar language in the 
Senate version of the Wall Street Reform and Consumer Protection Act, 
but it was ultimately not included in the final version of this law.
  I noted then that, ``if the Governors of the Federal Reserve System 
in Washington are required to be confirmed by the Senate, then the 
President of the Federal Reserve Bank of New York, who played a pivotal 
and perhaps more powerful role in obligating taxpayer dollars during 
the financial crisis, should also be subject to the same public 
confirmation process.''
  In short, the New York Fed is unlike any of the other 11 regional 
Federal Reserve Banks.
  For instance, along with the seven Governors of the Federal Reserve 
System who each require Senate confirmation, the president of the New 
York Fed is a permanent member of the Federal Open Market Committee, 
FOMC, and also acts as the FOMC's Vice Chairman. This is a significant 
distinction because the FOMC establishes the Federal Reserve System's 
monetary policy, which in the wake of the financial crisis resulted in 
the Federal Reserve's balance sheet growing to almost five times what 
it was before the crisis in an attempt to reduce long-term interest 
rates.
  Also, the New York Fed is solely responsible for implementing an 
aspect of monetary policy known as open market operations through which 
U.S. Treasury securities are purchased and sold on a secondary basis to 
influence the levels of bank reserves. This means that the New York Fed 
is in a position to pick and choose its counterparties in these 
secondary market transactions, giving considerable advantages to one 
market maker over another, which raises the potential for conflicts of 
interest.
  In addition, the New York Fed is entrusted with protecting the U.S. 
dollar in foreign exchange markets.
  According to the New York Fed itself, ``though it serves a 
geographically small area compared with those of other Federal Reserve 
Banks, the New York Fed is the largest Reserve Bank in terms of assets 
and volume of activity.'' Indeed, the New York Fed in its regulatory 
role is not only in charge of supervising some of the largest banks in 
the country, but also some of the most active financial institutions.
  While this is not a comprehensive list of the New York Fed's special 
and distinctive responsibilities, these examples demonstrate the 
powerful and pivotal role the New York Fed plays in implementing our 
Nation's monetary policy and enforcing our banking laws. As such, we 
should have every expectation that the New York Fed has the public 
interest in mind to the fullest extent when it conducts its duties.
  Unfortunately, these expectations have not been met. Last year, the 
Office of Inspector General, OIG, of the Board of Governors of the 
Federal Reserve System described the New York

[[Page S1033]]

Fed's oversight efforts with respect to one large banking institution 
that eventually suffered billions of dollars in trading losses as a 
``missed opportunity.'' Additionally, a report aired in September of 
last year on the public radio program ``This American Life'' cast doubt 
on whether changes the New York Fed made after the financial collapse 
to address regulatory capture were sufficient to ensure it would be a 
more proactive banking regulator and could prevent a future financial 
disaster.
  All of this is unsettling, and 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.
  By subjecting the president of the New York Fed to the confirmation 
process, an important check and balance will be added. The Senate will 
have 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. Also, 
this legislation requires the New York Fed president to testify before 
the Senate Banking Committee and the House Financial Services Committee 
at least once a year, so that Congress no longer has to negotiate about 
whether the New York Fed president will appear before Congress for 
oversight hearings. Simply put, this legislation is about holding the 
New York Fed accountable. The New York Fed is just too powerful to be 
left unchecked.
  I thank Americans for Financial Reform, Public Citizen, the AFL-CIO, 
and the Independent Community Bankers of America for their support, and 
I urge all my colleagues to join me in moving this legislation forward.

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