HONOLULU - Federal Reserve Chairman Alan Greenspan said small bank executives will be permitted to seek election to the Federal Advisory Council, an influential panel that meets four times a year with the central bank's board of governors.
The Fed chief did not guarantee small banks a seat on the council, which includes a representative from each of the 12 Federal Reserve districts. Instead, he said, "there is no reason why the smaller banks cannot seek selection for membership" and added that the central bank "is happy to receive" whomever the district banks elect.
The Fed chairman's decision came in a letter to Sen. Ben Nighthorse Campbell, D-Colo., who recently complained about the central bank's practice of excluding small banks from the council. Mr. Greenspan delivered a copy of his letter to the Independent Bankers Association of America, which held its annual convention here this week.
Kenneth A. Guenther, executive vice president of the trade group, hailed the decision.
"The record shows that prior to this welcome board decision, the FAC was a big bank cabal," he said. "At some Fed banks, the bank president told our members that we were not eligible for the FAC. They said, 'Don't even try.' "
The IBAA has been pressing the Fed for a decade to open up the FAC, which Mr. Guenther said exercises considerable influence over Fed policy.
"It is contrary to the principles of democracy that a small group of large banks meets four times a year with the Fed to discuss every issue under the sun with no public disclosure and no accountability," he said.
The meetings are closed to the public, and minutes summarizing the sessions are not released for three years.
In his letter, Sen. Campbell asked the Fed to consider two options: permit small banks to compete for membership on the Federal Advisory Council or form a new panel for community banks with equivalent access.
Mr. Guenther said the Fed chairman became personally involved in the issue after reading a newspaper account of Sen. Campbell's concerns. Fed Governor Edward W. Kelley Jr. was delegated to handle the matter and decided to recommend that the advisory council be opened up to small banks.