Wednesday, May 4, 2011
U.S. Rep. Barney Frank (D-Mass.) today introduced a bill that would let interest rates be set only by Federal Reserve officials picked by the government, a new attempt to move power away from regional Fed officials chosen by the private sector, The Wall Street Journal reported today. The bill would remove from the 12-member policy-setting Federal Open Market Committee the five members who represent regional Fed banks. Only the seven-member board in Washington, which currently has two vacant seats, would get to vote on interest rates. The congressman said this would make the Fed more democratic and increase "transparency and accountability on the FOMC" by eliminating those officials who are effectively picked by business executives. Analysts said Frank's new proposal could hurt the Fed's independence from Congress. "Setting interest rates...that's a public function. And the Federal regional presidents are picked by private citizens," Frank, the ranking member of the House Financial Services Committee, told CNBC. However, not letting regional Fed presidents have a say in monetary policy would be "tragic," Hoenig said today. The banks allow the public around the country to have an input on the Fed's decisions, he argued.