The Federal Reserve Bank of New York, under fire from critics in the aftermath of the credit crisis for its weight in the U.S. central bank system, got a vote of support from the head of its largest counterpart.
"I don't see the need for changes," San Francisco Fed President John Williams told reporters Thursday after a speech in Honolulu, saying he opposes a proposal to strip the New York district of its permanent vote on monetary policy and make other changes to the central bank's governance. "My view is the structure works well."
Dallas Fed President Richard Fisher proposed an overhaul in a speech last month that would take away the New York Fed's permanent vote on the policy-setting Federal Open market Committee in favor of an equal rotation among all 12 regional reserve banks.
Senate Banking Committee Chairman Richard Shelby, an Alabama Republican, held a hearing Tuesday on "Federal Reserve Accountability and Reform" that included discussion of Fisher's plan and other ways to revamp the central bank.
Shelby said at the hearing he will examine "the appropriateness of the Fed's current structure" since the Dodd- Frank Act of 2010, including proposals to make changes. "I have asked for the input of the Federal Reserve Banks and welcome their feedback in the coming weeks," he said.
Shelby "is seriously considering what he calls the Fisher plan," Fisher told reporters after making remarks at a community forum on Wednesday in El Paso, Texas. Fisher steps down on March 19 after a decade leading the Dallas Fed.
While Congress has the authority to set rules for the Fed, Williams said he is concerned that calls for changes, including the so-called "Audit the Fed" bill, re-introduced in January by Kentucky Senator Rand Paul, will negatively affect decision- making at the central bank.
"My fear is that auditing public monetary decisions and publicly critiquing them in real time, beyond what already can happen, I think has the danger of actually creating a more politicized Fed," he said. "Having that independence to make decisions in the short run may be unpopular, but in the long run it's better for the health of the U.S economy."