The New York Federal Reserve, widely considered to be the most powerful among the regional institutions in the central bank's system, may have its wings clipped by a growing movement in Congress, according to a report.
Politico reported on Saturday that two top House Republicans that sit on the banking committee are mulling proposals that would curb the New York Fed's authority over Wall Street and monetary policy. The idea, being pushed by former Dallas Fed president Richard Fisher, would revoke the New York Fed's permanent position as vice chair of the Federal Open Market Committee (FOMC)—the central bank's monetary policy making arm.
According to Fisher's proposal, the New York Fed chief would be a part of monetary policy decisions, yet wouldn't have an automatic vote, Politico reported. In addition, there should be a rotation among the regional Fed banks every two years, the report noted.
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The two Republicans, Banking Chairman Richard Shelby (R-Ala.) and House Financial Services chief Jeb Hensarling (R-Tx.), are both open to the idea of curbing the New York Fed's power, Politico's report said. Hensarling told the publication that he planned to take "a very serious look" at the proposal.
Unlike previous years where efforts to reform the independent central bank have been nonstarters, this time the political stars may be aligning for a change. Since the financial crisis, Democrats and Republicans have been united in their disdain for Wall Street, and growing skepticism about Fed policy is an undercurrent of that sentiment.
Currently helmed by Bill Dudley, the New York Fed has long had a position of power that has brought it heightened scrutiny. The institution's geographic location makes it the first line of defense in Wall Street regulation, but critics have charged the bank is captive to the interests of the powerful financial organizations it regulates.
Politico's full report can be found here.