Magazine article American Banker

Gonzalez Lambastes the Fed in First of a Series of Hearings

Magazine article American Banker

Gonzalez Lambastes the Fed in First of a Series of Hearings

Article excerpt

WASHINGTON -- House Banking Committee Chairman Henry B. Gonzalez turned up the heat on the Federal Reserve Thursday, portraying the central bank as an insular agency that wields enormous power with little oversight or accountability.

In the first of a series of hearings on the Fed, the Texas Democrat focused attention on the 12 district bank presidents, who hold five of the 12 seats on the policymaking Federal Open Market Committee.

The Reserve Bank presidents, he said, are essentially appointed by the commercial bankers who select a majority of each bank's directors.

An 'Exclusive Club'

"There has been only one woman and no minority bank presidents in the Federal Reserve System's 80-year history," said Rep. Gonzalez. "I want to take the 'bankers and their friends' sign off the door to this exclusive club and open it up to all competent Americans."

The banking committee chairman has introduced legislation that would open the Fed up to more disclosure and subject the district bank presidents to presidential appointment and Senate confirmation.

Although the Fed is said to be nervous about the bill, most observers doubt that Congress will approve legislation in the near future. Most recently, President Clinton appeared to dampen prospects for legislation by telling Rep. Gonzalez he would not support change at this time.

Seen as Having Too Much Sway

The panel of lawmakers who appeared before the banking committee largely shared Rep. Gonzalez's views. Sen. …

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