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Demos Applauds Goals of Federal Reserve Independence Act, Urges Protection Against Self-Regulation By Banks
NEW YORK - June 7 - Leaders in the U.S. Senate recently introduced a bill that would help significantly shift the direction of the financial sector toward the common good by ensuring that independent directors, not industry executives, regulate the big banks. Introduced on May 22 by Senator Bernie Sanders, with co-sponsors Senator Barbara Boxer and Senator Mark Begich, “The Federal Reserve Independence Act” (S.3219) would prohibit banking industry executives from serving as directors of the twelve regional Federal Reserve Banks.
Heather McGhee, Vice-President at Demos, issued the following statement:
“Creating an economy that works for the common good is the shared responsibility of business, government and individuals, but right now, Wall Street banks have too much power to set national priorities in their own self-interest. Reducing glaring conflicts of interest between the banking system and its regulators is essential to creating an economy that works for all of us.
“Since the establishment of the Federal Reserve, there have been many directors that have held positions at the Fed while simultaneously leading the firms the Fed must regulate. JPMorgan Chase CEO Jamie Dimon is just the latest and most obvious example. The stakes have gotten too high and the systemic risk too broad, for us to ignore this inherent conflict of interest. Senator Sanders' proposed legislation is an important step toward a safer economy for everyone.”
The “Federal Reserve Independence” Act legislation would:
- Prohibit banking industry executives or other employees in companies regulated by the Fed from serving on any of the Federal Reserve’s boards of directors;
- Prohibit the banking industry from selecting any of the Fed’s board of directors.
- Prohibit Federal Reserve employees or board members from owning stock or investing in companies that the Fed oversees, regulates, and supervises without any exceptions or waivers.
Read Demos’ Report: Six Principles for True Systemic Risk Reform: A Policy Brief