The Federal Reserve's 12 regional banks have little impact on the nation's monetary policy, according to a study to be released today.
The Federal Reserve Board frequently turned down appeals to raise rates by the regional banks from 1993 to 1996, according to the nonprofit Financial Markets Center. Between March 1994 and October 1996, the board rejected seven of 12 requests for rate increases approved by a majority of the banks.
By rejecting the requests, the board demonstrated "highly centralized decision-making" that offered "limited influence" for the regional banks, the center said.
During the four-year period, regional banks made 211 recommendations to raise the discount rate, the amount commercial banks pay to borrow from the Federal Reserve. In those years, the Fed raised the discount rate 2 net percentage points.
Four reserve banks-Richmond, St. Louis, Kansas City, and Boston- accounted for nearly two-thirds of requests to raise the discount rate.
The 12 regional banks suggested cuts only 39 times.