[Congressional Record (Bound Edition), Volume 160 (2014), Part 11]
[Senate]
[Page 15966]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. REED:
  S. 2937. 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, today I am introducing legislation that 
would require the head of the Federal Reserve Bank of New York to be 
Presidentially appointed and Senate confirmed.
  In 2010, I worked to include similar language in the Senate version 
of the Wall Street Reform and Consumer Protection Act, but this 
provision was ultimately not included in the final version of this law.
  At the time, I noted 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.''
  As the response to the financial crisis showed, the New York Fed is 
unlike any of the other eleven 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 not only a permanent member of the Federal Open Market 
Committee, FOMC, but also acts as the FOMC's Vice Chairman. This is an 
important 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.
  Additionally, the Federal Reserve Bank of New York 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. 
In other words, this means that the New York Fed is in a position to 
pick and choose its counterparties in these secondary market 
transactions, giving significant advantages to one market maker over 
another, which raises the potential for conflicts of interest.
  Also, 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 
capacity 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 an exhaustive list of the New York Fed's unique 
responsibilities, these examples demonstrate the extremely 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 month, the 
Office of Inspector General, OIG, of the Board of Governors of the 
Federal Reserve System described the New York Fed's oversight efforts 
with respect to one large banking institution that eventually suffered 
billions of dollars in trading losses as a ``missed opportunity.'' On 
top of this, a report aired in September 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 the New York Fed would be a more proactive banking 
regulator and could prevent a future financial disaster.
  All of this is disturbing, and it is past time that we add meaningful 
layers of accountability in order to prevent another problem from 
snowballing into a crisis because of the New York Fed's continued 
unwillingness 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 a vital 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. In addition, 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 and when 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, and the AFL-
CIO for their support, and I urge all my colleagues to join me in 
moving this legislation forward.

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