Out of the 12 banks in the Federal Reserve system, only New York has a permanent spot on the interest-rate-setting Federal Open Market Committee.
Only New York oversees the critical Wall Street institutions like Goldman Sachs, and only New York is under congressional scrutiny this week for its cozy relationship with the institutions it is supposed to regulate.
After This American Life and ProPublica published secret recordings that seemed to demonstrate regulators deferring to the institutions they regulate, Sen. Sherrod Brown of Ohio called for hearings, which will take place Friday. Brown plans to hold N.Y. Fed President William Dudley accountable, and to push him to prioritize regulation as highly as interest rates.
Meanwhile, Sen. Jack Reed of Rhode Island has put forward legislation that would change how the next William Dudley would be selected. Reed would take the decision out of the hands of board members – mainly business people – and put it in the hands of the president. Massachusetts Institute of Technology economist Simon Johnson says that’s exactly the right approach.
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