The Federal Reserve should shuffle its policy-making and bank-supervision rules to address perceptions of conflicts of interest and regulatory capture in the power centers of New York and Washington, an outspoken Fed official said on Wednesday.
Richard Fisher, addressing a New York audience for likely the last time before stepping down next month as president of the Dallas Fed, again warned against delaying an interest rate hike in the face of weak inflation. But his most provocative remarks to economists here criticized a central bank structure that he said "makes no sense."
Though they are unlikely to be taken up any time soon, Fisher suggested three key changes: six of the 12 regional Fed presidents should vote on monetary policy alongside six Fed governors in Washington, with Chair Janet Yellen as tie-breaker, to "balance out the division of power."
Second, the New York Fed's permanent vote on policy, due to its president William Dudley's vice chairmanship of the Federal Open Market Committee, should be rotated every two years among the regional Fed banks to address "the appearance of a conflict of interest."
Third, Fisher said, the "problem of regulatory capture" can be fixed by transferring oversight of Wall Street banks to supervisors from one of the other 11 district Fed banks.
"I think we at the Fed must fully and frontally address the concern of many who feel that too much power is concentrated in the New York Fed," Fisher said in prepared remarks. "I understand the suspicions that surround the New York Fed."