WASHINGTON, June 15 (Reuters) - Democrats in the U.S. House of Representatives said on Tuesday they would try to strike from a regulatory reform bill a Senate provision that would make the head of the New York Federal Reserve Bank a political appointee.
If successful, the effort would be a big win for the U.S. central bank. Many Fed officials had vocally opposed the provision, which they argued would undermine the Fed's political independence.
The Senate's attempt to make the New York Fed more politically accountable followed criticisms that the central bank had become too cozy with the banks it regulates.
In one instance, Stephen Friedman, a former CEO of Goldman Sachs, played a pivotal role in picking William Dudley, a former Goldman partner, to head the New York Fed.
In place of the Senate measure, House negotiators said they want to insert a provision that would prevent regional Fed bank directors representing financial institutions from having a say on who will head their regional central banks. The Fed had been quietly pushing for a compromise along these lines.
In a statement released by House Financial Services Committee Chairman Barney Frank, the House Democrats also said they would seek to amend a provision of the Senate bill that would allow a one-time audit of Fed emergency lending during the financial crisis so that it would cover lending from the U.S. central bank's discount window and open market transactions.
Since the Fed conducts monetary policy in part through open market operations, the step could be seen as effectively an audit of past interest rate policy, although Frank said any audits would not include monetary policy.
'Anything that makes the Federal Reserve more political or subject to political review, is I think a step backwards,' said Charles Lieberman, chief investment officer for money management firm Advisors Capital Management and a former New York Fed official.
((For more stories on Fed policy go to))
(Reporting by Tim Ahmann, Pedro Nicolaci da Costa and Kristina Cooke; Editing by Neil Stempleman) Keywords: FINANCIAL REGULATION/FED (pedro.dacosta@thomsonreuters.com; +1 202 354-5820; Reuters Messaging: pedro.dacosta.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
If successful, the effort would be a big win for the U.S. central bank. Many Fed officials had vocally opposed the provision, which they argued would undermine the Fed's political independence.
The Senate's attempt to make the New York Fed more politically accountable followed criticisms that the central bank had become too cozy with the banks it regulates.
In one instance, Stephen Friedman, a former CEO of Goldman Sachs, played a pivotal role in picking William Dudley, a former Goldman partner, to head the New York Fed.
In place of the Senate measure, House negotiators said they want to insert a provision that would prevent regional Fed bank directors representing financial institutions from having a say on who will head their regional central banks. The Fed had been quietly pushing for a compromise along these lines.
In a statement released by House Financial Services Committee Chairman Barney Frank, the House Democrats also said they would seek to amend a provision of the Senate bill that would allow a one-time audit of Fed emergency lending during the financial crisis so that it would cover lending from the U.S. central bank's discount window and open market transactions.
Since the Fed conducts monetary policy in part through open market operations, the step could be seen as effectively an audit of past interest rate policy, although Frank said any audits would not include monetary policy.
'Anything that makes the Federal Reserve more political or subject to political review, is I think a step backwards,' said Charles Lieberman, chief investment officer for money management firm Advisors Capital Management and a former New York Fed official.
((For more stories on Fed policy go to))
(Reporting by Tim Ahmann, Pedro Nicolaci da Costa and Kristina Cooke; Editing by Neil Stempleman) Keywords: FINANCIAL REGULATION/FED (pedro.dacosta@thomsonreuters.com; +1 202 354-5820; Reuters Messaging: pedro.dacosta.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.