Sen. Paul Sarbanes, D-Md., and Rep. Lee H. Hamilton, D-Ind., introduced legislation earlier this month that would make the Federal Reserve Board of Governors solely responsible for the conduct of the nation's monetary policy.
Monetary policy issues currently are decided by the Federal Open Market Committee, which includes both the board and several of the regional Federal Reserve Banks.
Reserve banks are headed by presidents, who are accountable primarily to boards of directors "dominated by commercial banks," according to Sen. Sarbanes.
The effect of the legislation, if approved, would be to remove the reserve bank presidents from voting roles in setting monetary policy.
"The FOMC is the only monetary policy-making body in a major industrialized nation on which we find bank presidents, private individuals, making government economic policies," Rep. Hamilton said. "Power without accountability simply does not fit into the American system of democracy."
