WASHINGTON – Congressman Barney Frank today released a detailed statement calling for increased democratization of the Federal Open Market Committee (FOMC), the body within the Federal Reserve that oversees monetary policy by setting targets for interest rates. This issue is particularly important because of the powerful role being played by the FOMC during the current period of considerable economic distress.
Currently, the 12 voting members of the committee are made up of the 7 members of the Federal Reserve Board of Governors, who are nominated by the President and subject to Senate confirmation, and 5 of the 12 presidents of the regional Federal Reserve Banks. The 5 members are not subject to a confirmation process by elected officials, and instead are chosen by regional Federal Reserve Bank directors who effectively are appointed by large commercial banks in each region.
In his statement Frank says that this creates “a self-perpetuating group of private citizens who select each other and who are treated as equals in setting federal monetary policy with officials nominated by the President and confirmed by the Senate.” Frank argues that this results in the Federal Reserve Chairman presiding “over a structure where he confronts people appointed by business interests who do not share the commitment to equal consideration of the full employment section of the Federal Reserve’s dual mandate” to combat inflation and promote employment.
Last spring, Congressman Frank introduced a bill which would remove the 5 members of the FOMC not subject to Senate confirmation. Some have argued that those 5 members are needed to provide regional diversity to the FOMC. In upcoming weeks, Frank plans to introduce new legislation which would address that concern by still eliminating those 5 current positions but requiring the President to nominate 4 new members to represent the Federal Reserve Bank regions. Those 4 members would be “subject to Senate confirmation, but not otherwise employed by the Federal Reserve system.”
In the statement which is being made public today, Frank lays out the intellectual framework for his planned legislation.
Click here to view the statement.