Fed Presidents Take Case to Congress For Keeping Bank Supervision
Leading the effort are the Kansas City Feds Thomas Hoenig, the longest-serving policy maker, and Jeffrey Lacker of Richmond, chairman of the Feds Conference of Presidents, said officials with knowledge of the deliberations. In an opening salvo, Hoenig sent a letter Feb. 19 to 14 senators saying proposed laws in the Senate wouldnt improve financial regulation.
Senate Banking Committee Chairman Christopher Dodd has proposed stripping regional banks duties while giving the Feds Washington-based Board of Governors some oversight of big firms. The measure would leave most of the 12 district banks with little to do outside of helping set interest-rate policy. The presidents campaign wasnt opposed by the board, which has a staff dedicated to dealing with Congress.
The lobbying “reflects the frustration on the part of the district banks with the boards efforts to retain its supervision and regulatory powers over community banks,” said Camden Fine, president of the Independent Community Bankers of America, a Washington group representing about 5,000 firms. The Fed has a “very steep, uphill fight” against the legislative proposals, Fine said.
Fed bank presidents held a conference call Feb. 18 to plot strategy and plan to contact individual lawmakers, said officials with knowledge of the discussions, and Hoenig is scheduled to appear on C-Span this week. The call was separate from a regularly scheduled talk on Mondays with Fed congressional liaisons.
Draft Legislation
Bank presidents began discussing establishing more direct contact with Congress after draft legislation from Dodd, a Connecticut Democrat, proposed to strip the Fed of bank supervisory powers and the House approved a bill in December that would open monetary policy to government audits.
Some presidents decided that the Board of Governors lobbying efforts didnt produce any wins for the Fed and then decided to make their case with legislators directly, according to an official familiar with the conversations.
“It is a striking irony to me that the outcome of the public anger directed toward Washington and Wall Street may lead to the further empowerment of both Washington and Wall Street in regulating financial institutions,” Hoenig said in the letter, written in response to lawmakers questions.
Banking Panel Members
Hoenigs missive was addressed to Senator Michael Bennet, a Colorado Democrat, and Senator Mike Johanns, a Nebraska Republican, both members of the banking panel. It was copied to the 12 other senators in Hoenigs seven-state region.
Michelle Smith, spokeswoman for the Feds board in Washington, and Laura Fortunato, a spokeswoman for the Richmond Fed, declined to comment.
Fed Chairman Ben S. Bernanke won a 70-30 Senate vote last month for a second four-year term, the most opposition since the chamber started approving Fed chiefs in 1978. Another part of the Senate legislation may give the White House and lawmakers greater say in selecting the regional Fed presidents.
The topics may come up when Bernanke visits Capitol Hill Feb. 24-25 for semiannual testimony on monetary policy and the economy, in hearings before the House Financial Services Committee and the Senate banking panel.
Amplifying Defense
Bernanke has been amplifying his defense as well. Last month he sent an 11-page letter to senators saying stripping the central bank of its authority to supervise banks could harm its ability to conduct monetary policy and provide emergency aid to lenders. The board delegates bank-supervision powers to the regional banks.
“Were all pulling in the same direction,” which is to have the supervision powers “that are appropriate for the Federal Reserve to do our duty” as the lender of last resort, Dallas Fed President Richard Fisher said in an interview. He said he hasnt contacted lawmakers on the issue and doesnt plan to.
Hoenig, 63, a former bank examiner, will get to discuss the issues before a national television audience this week. He is tentatively scheduled to appear on C-Spans morning call-in show Feb. 26, said Howard Mortman, a spokesman for the network.
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