Bill Seeks to Revamp Federal Reserve Board
WASHINGTON (AP) _ Legislation to shrink the Federal Reserve board that develops interest-rate policies was introduced Thursday by two lawmakers who contend the central bank should be more politically accountable.
The bill of Sen. Paul Sarbanes, D-Md., chairman of the Joint Economic Committee, and Rep. Lee Hamilton, D-Ind., the vice-chairman, would strip the power the Fed's regional bank presidents have in setting monetary policy.
Five of the Fed's 12 regional bank presidents serve at any one time as voting members of the 12-member Federal Open Market Committee, the panel that sets interest-rate policies.
The Sarbanes-Hamilton bill would abolish the committee and leave monetary policy solely in the hands of the Fed's seven-member board of governors. The bank presidents would retain only an advisory role to the Fed board.
The lawmakers said the proposal would make the Fed more politically accountable. While the Fed board, headed by Chairman Alan Greenspan, is appointed by the president and confirmed by the Senate, the regional bank presidents are not.
The 12 bank presidents are selected by the boards of directors of each regional bank, a group dominated by commercial bankers.
"The FOMC is the only monetary policymaking body in a major industrialized nation on which we find bank presidents, private individuals, making government economic policies," said Hamilton.
Other sponsors of the "Monetary Policy Reform Act of 1991" include Senate Budget Committee Chairman Jim Sasser, D-Tenn., and Rep. Byron Dorgan, D-N.D.
Private economists, who monitor the Fed's actions, said if the measure became law it would more than likely contribute to a looser monetary policy that would lean more to promoting economic growth while worrying less about