WASHINGTON, March 23 – Sen. Bernie Sanders (I-Vt.) on Thursday introduced legislation to block bank executives like Silicon Valley Bank’s Gregory Becker from serving on regional Federal Reserve boards that regulate the banks they run.
“I think it would come as a shock to most Americans to find out that Gregory Becker, the CEO of Silicon Valley Bank, who successfully lobbied for the deregulation of his financial institution was allowed to serve as a director of the same body in charge of regulating his bank: the San Francisco Federal Reserve,” Sanders said. “It is clear to me and to the American people, that the CEOs of the largest banks in America should not be allowed to serve as directors of the main agency we have in this country in charge of regulating those very same financial institutions. The Fed has got to become a more democratic institution that is responsive to the needs of working people and the middle class, not just CEOs of some of the largest financial institutions in America.”
Today, two-thirds of the directors of the 12 regional Federal Reserve boards are hand-picked by the same bankers that the Federal Reserve charged with regulating. Moreover, five CEOs of financial institutions with over $150 billion in assets currently serve as directors of Federal Reserve banks. For example, the CEO of State Street, which has nearly $300 billion in assets, currently serves as a director of the Boston Federal Reserve. The CEO of M&T Bank, which has over $200 billion in assets, currently serves as a director of the New York Fed. The CEO of Ally Bank, which has assets of over $180 billion in assets, is currently a director of the Richmond Fed. And the CEO of Northern Trust, with assets of more than $150 billion, currently serves on the Chicago Fed. All would be prohibited from serving on Federal Reserve regional boards if Sanders’ legislation became law.
A 2011 audit by the Government Accountability Office (GAO) – conducted thanks to a Sanders-introduced provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act – found that allowing members of the banking industry to both elect and serve on the Federal Reserve’s board of directors creates “an appearance of a conflict of interest” and poses “reputational risks” to the Federal Reserve System.
Sanders’ Federal Reserve Independence Act would also prevent Federal Reserve employees and board members from owning any stock or investing in any institution that the central bank is in charge of regulating.
Organizations endorsing this legislation include: Americans for Financial Reform, Demos, Revolving Door Project, Public Citizen, Working Families Party, and Association of Flight Attendants-CWA.
Read the bill text, here.
Read the Dear Colleague letter, here.
