Federal Reserve Board: Paper by Jordan Haedtler, Andrew Levin, and Valerie Wilson Propose Reform to Fed Structure; Diversity Important to Foster Well-Considered Monetary Policy

Haedtler, Jordan; Levin, Andrew; and Wilson, Valerie (2016), “Making the Federal Reserve Fully Public: Why and How,” paper, August.

This paper outlined current issues presented by the current operations of the Federal Reserve Board and the Federal Reserve Banks (collectively, the Fed). The authors present several ideas for thinking about reforms (that would not affect the Fed’s political independence (a long-used diversionary tactic against any reform, see Auerbach, Robert D. (2008), Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan’s Bank, Austin: University of Texas Press.”).


The graphic (below) shows the potential obstinacy the authors are up against with the Fed; persistence is key and absolutely necessary in this case. The Fed is a public agency; it is way past time for the organization to accept it.

2014-03-04-auerbach
Sheila Clark’s letter to the EEOC (printed in the Aurebach book, page 123).

 

I will review topics in the paper that caught my attention in this post. (Again, the full paper is located here.)


Related blog posts–

https://alexwdc.wordpress.com/2016/05/24/federal-reserve-board-democratic-members-of-congress-write-letter-to-board-lack-of-diversity-adversely-affects-policymaking/

https://alexwdc.wordpress.com/2016/04/28/federal-reserve-board-andrew-levin-and-fed-up-propose-recommendations-to-ensure-that-the-board-consider-the-views-of-all-people-in-the-united-states/


 

While the paper is necessarily technical (especially, the composition of the boards of the Federal Reserve Banks), the observation of the ill effects of the current structure of the Fed is extremely important. The ultimate goal of the Fed must be to work for the entire population of the United States of America.

First, the authors noted that the lack of diversity, in terms of race, gender, and profession, as well as sectoral diversity leads to perspectives of many segments of the population being left out in monetary policy discussion. For example, the paper explained that the effect of monetary policy was not discussed in the following areas:

  • African Americans suffer disproportionately from labor market downturns and benefit markedly from economic recoveries. However, this issue was little mentioned in the Federal Open Market Committee, or FOMC, meetings.
  • A focus on inflation, the authors continued, rather than on full employment reflected the make-up of the people in the room–multimillionaire chief executive officers and other major corporate figures. People with this wealth or income have different perspectives than small business owners, debtors, students, middle- and low-income workers, and those seeking credit.

Second, the paper makes note of the need of an independent office of the inspector general. While the Board has an Inspector General, the office is not independent because the office depends on the Board for his or her position as well as for the budget to operate the office. As noted in a previous post

The Board’s [Inspector General] IG is not truly independent, rather it is an arm of the Board’s Chair. The Board’s Chair appoints the IG. (See Auerbach, Robert D. (2008), Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan’s Bank, Austin: University of Texas Press, pages 113-115 (esp. first full paragraph on page 114).) In addition, the Board funds the operations of the IG (see, for example, Board Annual Report, 2013, page 314 (paragraph 3)).

In addition, that authors mention a recommendation of an audit by the Government Accountability Office, or GAO. It is unclear what type of audit the authors are seeking–financial or performance. It seems to be a mixture of the two. But performance audits must be carefully monitored and examined. I have discussed the weakness of the performance audit previously in the blog.

Third, the authors briefly discuss the Board’s semiannual Monetary Policy Report. Presently, the MPR is mostly historical (previous six-month period) at the time it is distributed to members of Congress. The MPR tends to be wordy, filled with distracting graphical material, and difficult to discern the points the Board is seeking to present. I think a more focused and clear report is necessary for the Board to fulfill its obligations to the public.

The authors’ proposal should be included with proposals from former Board Vice Chair Donald Kohn (presented previously in the blog).

It will be interesting to see which reforms occur as a result of this well-written paper.

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Federal Reserve Board: H.2 Release for Week Ending August 13, 2016; H.4.1 Release (Balance Sheet) for Week Ending August 18, 2016

The Federal Reserve Board (Board) publishes a weekly digest of its activities on its website. The digest is called the H.2 Release and is published every Thursday. The release for the week ending August 13, 2016, is below.

H.2 Release–Actions of the Board, Its Staff, and the Federal Reserve Banks; Applications and Reports Received

Category Action Taken
Advisory Councils Community Depository Institutions Advisory Council — announcement of members and designation of Janet A. Garufis as president and Gilda M. Nogueira as vice president for 2017.

-Announced, August 9, 2016

 

 

Forms Forms — final Board review to extend with revision the Notice of Proposed Declaration of Dividend (FR 1583) and Savings and Loan Holding Company Registration Statement (FR LL-10(b)).

-Approved, August 10, 2016

 

 

Regulations and Policies Presidential $1 Coin Program — annual report to Congress on the Presidential $1 Coin Program.

-Approved, August 2, 2016

(A/C)

 

Enforcement First American State Bank, Greenwood Village, Colorado — written agreement dated August 20, 2010, terminated August 3, 2016.

-Announced, August 9, 2016

 

First Bankshares, Inc., Barboursville, West Virginia — written agreement with the Federal Reserve Bank of Richmond and the West Virginia Division of Financial Institutions.

-Announced, August 11, 2016

 

Liberty Bank, South San Francisco, California — written agreement with the Federal Reserve Bank of San Francisco.

-Announced, August 11, 2016

 

 

Federal Reserve Board: Balance Sheet (H.4.1 Release)

The Board publishes data of factors affecting reserve balances. The digest is called the H.4.1 Release, and they are published every Thursday (or the next business day if the publication date falls on a federal holiday). The release for August 18, 2016, is below.

[Note: The blog will cover the line titled “Total Factors Supplying Reserve Funds.”]

H.4.1 Release–Factors Affecting Reserve Balances

Total factors supplying reserve funds (as of August 17, 2016):  $4,512,054 (in millions of dollars). (On September 26, 2007, this amount was $900,473 (in millions of dollars)).

(See the release for further information.)

Ryan Lochte: When Wealth, Athletic Ability, Nationality, Race, and Gender Blurs Accountability–His Story of Armed Robbery Collapsed; Teammates Held in Brazil to Provide Statements, while Lochte Is in the United States

Ryan Lochte, 32, competed as a swimmer in the 2016 Summer Olympics in Rio de Janeiro, Brazil. After completing his events, however, he became involved in an incident outside of the Olympic Village.

On Sunday August 14, 2016, Lochte stated that he had property taken at gunpoint in an interview with NBC’s Billy Bush. Present with Lochte were U.S. Olympic teammates Gunnar Bentz, Jack Conger, and James Feigen. Lochte continued his account, with some changed details, in an interview with Matt Lauer on August 18 (http://www.today.com/news/ryan-lochte-defends-rio-robbery-account-matt-lauer-we-wouldn-t101973).

Lochte also posted a statement on his Instagram account.

Brazilian authorities conducted an investigation and found that the facts did not accord with Lochte’s version of events. (In addition, Brazilian police recommended that the prosecutor file charges against Lochte and Feigen (the elder men of the four) for filing a false police report of a crime.)


[Update (August 19, 2016): Ryan Lochte offers a so-called apology second explanation for the incident in Brazil. (Media in the United States are far too lenient (yet also way too inclusive) with the word “apology.” It’s shameful. Lochte said he was robbed of his property at gunpoint with NBC’s Billy Bush on Sunday August 14, 2016. This so-called statement is unacceptable.)

Separately, as reported in the Washington Post, James Feigen will make a payment of $10,800 to a Brazilian charity, Instituto Reação (in Portuguese), and will then be free to leave Brazil.]


Seeming to want to refocus attention on the Olympic Games, a spokesman for the International Olympic Committee, Mario Andrada, asked for people to consider the event an occurrence of error.

“These kids tried to have fun, they tried to represent their country to the best of their abilities,” Andrada said. “They competed under gigantic pressure. Let’s give these kids a break. They had fun, they made a mistake, life goes on.”

Kids? It is necessary to mention the ages of the adult athletes involved:

Name Age Net Worth
Ryan Lochte 32 (3-Aug-84) (estimated net worth of $3 million)
Gunnar Bentz 20 (3-Jan-96)
Jack Conger 21 (26-Sept-94)
James Feigen 26 (26-Sept-89)

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The swimmers involved are young adults, not children. In addition, the statement gives a broad latitude to excuse  misbehavior by athletes. That Lochte left his teammates to carry the weight of this situation shows his unwillingness to accept responsibility for one’s actions and failure to support his friends/fellow teammates. (Also, one must consider whether an equivalent light hand would be offered to nonwhite athletes (or athletes from non-wealthy nations).)

All is not lost if Lochte sorts out and repairs this unfortunate event, including paying for damages to the gasoline station and making amends with the authorities of the Olympic host city of Rio de Janeiro. If not, then Lochte has lost my respect.

[Author’s Note: The other three seem to have been caught up in this cover-up situation and left to fend for themselves. I do believe that a second chance is merited (for these 3). If only this mercy were universally provided to all human beings who make mistakes, the world would be a much better place.)]

Of note: Amini Fonua, swimmer and Olympic athlete from Tonga, posted a tweet in support of Feigen.

Federal Reserve Board: H.2 Release for Week Ending August 6, 2016; H.4.1 Release (Balance Sheet) for Week Ending August 12, 2016

The Federal Reserve Board (Board) publishes a weekly digest of its activities on its website. The digest is called the H.2 Release and is published every Thursday. The release for the week ending August 6, 2016, is below.

H.2 Release–Actions of the Board, Its Staff, and the Federal Reserve Banks; Applications and Reports Received

Category Action Taken
Bank Holding Companies Chemical Financial Corporation, Midland, Michigan — to merge with Talmer Bancorp, Inc., Troy, and thereby indirectly acquire Talmer Bank & Trust; and for Chemical Bank, Midland, to merge with Talmer Bank & Trust, Troy, and thereby establish branches.

-Approved, August 5, 2016

 

Forms Forms — initial Board review to extend with revision the Debit card issuer survey (FR 3064a) and to extend without revision the Payment card network survey (FR 3064b).

-Proposed, August 2, 2016

 

Monetary and Financial Policy Term Deposit Facility — floating-rate offering of seven-day term deposits with an early withdrawal feature, same-day settlement, and a maximum tender amount of $5 billion on August 11, 2016.

-Announced, August 4, 2016

 

 

Personnel Division of Reserve Bank Operations and Payment Systems — appointment of Marta Chaffee as senior associate director.

-Announced, August 2, 2016

Regulations and Policies Rules of Practice for Hearings — publication for comment of interim final rule adjusting the Board’s civil money penalties to account for inflation.

-Announced, August 1, 2016

 

Enforcement Calwest Bancorp, Rancho Santa Margarita, California — written agreement dated April 29, 2011, terminated July 28, 2016.

-Announced, August 2, 2016

 

Elgin Bancshares, Inc., Elgin, Illinois — written agreement dated January 19, 2011, terminated July 27, 2016.

-Announced, August 2, 2016

 

FEB Bancshares, Inc., Louisville, Alabama — written agreement dated December 21, 2010, terminated July 28, 2016.

-Announced, August 2, 2016

 

The Goldman Sachs Group, Inc., New York, New York, and Goldman, Sachs & Co. (together, “Goldman Sachs”) — issuance of a consent cease-and-desist order and assessment of a civil money penalty on Goldman Sachs, and notice of intent to prohibit and notice of assessment of a civil money penalty against Joseph Jiampietro, a former institution-affiliated party of Goldman, Sachs & Co.

-Approved, August 2, 2016

 

Village Bank and Trust Financial Corp, Midlothian, Virginia — written agreement dated June 26, 2012, terminated July 28, 2016.

-Announced, August 2, 2016

 

Federal Reserve Board: Balance Sheet (H.4.1 Release)

The Board publishes data of factors affecting reserve balances. The digest is called the H.4.1 Release, and they are published every Thursday (or the next business day if the publication date falls on a federal holiday). The release for August 12, 2016, is below.

[Note: The blog will cover the line titled “Total Factors Supplying Reserve Funds.”]

H.4.1 Release–Factors Affecting Reserve Balances

Total factors supplying reserve funds (as of August 11, 2016): $4,514,504 (in millions of dollars). (On September 26, 2007, this amount was $900,473 (in millions of dollars)).

(See the release for further information.)

Federal Reserve Board: H.2 Release for Week Ending July 30, 2016; H.4.1 Release (Balance Sheet) for Week Ending August 5, 2016

The Federal Reserve Board (Board) publishes a weekly digest of its activities on its website. The digest is called the H.2 Release and is published every Thursday. The release for the week ending July 30, 2016, is below.

H.2 Release–Actions of the Board, Its Staff, and the Federal Reserve Banks; Applications and Reports Received

Category Action Taken
Bank Holding Companies Huntington Bancshares Incorporated, Columbus, Ohio — to merge with FirstMerit Corporation, Akron, and thereby indirectly acquire FirstMerit Bank, N.A.

-Approved, July 28, 2016

 

Banking Supervision and Regulation Resolution Plans — approval of letters, issued jointly with the Federal Deposit Insurance Corporation, to extend the filing date for the 2016 resolution plan submissions of 38 firms to December 31, 2017.

-Approved, July 27, 2016

 

Forms Forms — final Board review to extend without revision the Report of Selected Balance Sheet Items for Discount Window Borrowers (FR 2046) and to extend with revision the Payments Research Survey (FR 3067).

-Approved, July 28, 2016

 

Regulations and Policies Margin and Capital Requirements for Covered Swap Entities — interagency final rule to exempt certain commercial and financial end users from margin requirements for certain swaps not cleared through a clearinghouse, in accordance with the Terrorism Risk Insurance Program Reauthorization Act.

-Approved, July 18, 2016

(A/C)

 

Enforcement CCF Holding Company, Jonesboro, Georgia — written agreement dated October 19, 2010, terminated July 22, 2016.

-Announced, July 28, 2016

 

Columbus Junction State Bank, Columbus Junction, Iowa — issuance of consent orders of prohibition against Thomas H. Huston and T. Mark Huston, former institution-affiliated parties of Columbus Junction State Bank, a former state member bank.

-Announced, July 28, 2016

 

Federal Reserve Board: Balance Sheet (H.4.1 Release)

The Board publishes data of factors affecting reserve balances. The digest is called the H.4.1 Release, and they are published every Thursday (or the next business day if the publication date falls on a federal holiday). The release for August 5, 2016, is below.

[Note: The blog will cover the line titled “Total Factors Supplying Reserve Funds.”]

H.4.1 Release–Factors Affecting Reserve Balances

Total factors supplying reserve funds (as of August 4, 2016):  $4,512,433 (in millions of dollars). (On September 26, 2007, this amount was $900,473 (in millions of dollars)).

(See the release for further information.)

Federal Reserve Board: H.2 Release for Week Ending July 23, 2016; H.4.1 Release (Balance Sheet) for Week Ending July 28, 2016

The Federal Reserve Board (Board) publishes a weekly digest of its activities on its website. The digest is called the H.2 Release and is published every Thursday. The release for the week ending July 23, 2016, is below.

H.2 Release–Actions of the Board, Its Staff, and the Federal Reserve Banks; Applications and Reports Received

Category Action Taken
Extensions of Time Regulation YY — requests by (1) Societe Generale to delay the requirement to establish a U.S. intermediate holding company (IHC) for six months; and (2) Banco Bilbao Vizcaya Argentaria for a six-month extension of time to transfer five U.S. subsidiaries to its IHC.

-Granted, July 5, 2016

(A/C)

 

 

 

Forms Forms — initial Board review to extend with revision the Capital Assessments and Stress Testing information collection (FR Y-14A/Q/M).

-Proposed, July 20, 2016

 

 

Regulations and Policies Regulations Z (Truth in Lending) and M (Consumer Leasing) — publication for comment of interagency amendments to official staff interpretations to clarify the method used to determine thresholds for exempting (1) certain consumer credit and lease transactions from the Truth in Lending Act and Consumer Leasing Act, respectively, and (2) certain small loans from the real estate appraisal requirements for higher-priced mortgages, both based on changes in the consumer price index.

-Approved, July 18, 2016

 

 

Enforcement UBS AG, Zurich Switzerland, and Barclays Bank, PLC, London, England — issuance of a consent order of prohibition against Matthew Gardiner, a former institution-affiliated party of UBS AG and Barclays Bank, PLC.

-Announced, July 19, 2016

 

 

 

Federal Reserve Board: Balance Sheet (H.4.1 Release)

The Board publishes data of factors affecting reserve balances. The digest is called the H.4.1 Release, and they are published every Thursday (or the next business day if the publication date falls on a federal holiday). The release for July 28, 2016, is below.

[Note: The blog will cover the line titled “Total Factors Supplying Reserve Funds.”]

H.4.1 Release–Factors Affecting Reserve Balances

Total factors supplying reserve funds (as of July 27, 2016):  $4,509,806 (in millions of dollars). (On September 26, 2007, this amount was $900,473 (in millions of dollars)).

(See the release for further information.)

Federal Reserve Board: H.2 Release for Week Ending July 16, 2016; H.4.1 Release (Balance Sheet) for Week Ending July 21, 2016

The Federal Reserve Board (Board) publishes a weekly digest of its activities on its website. The digest is called the H.2 Release and is published every Thursday. The release for the week ending July 16, 2016, is below.

H.2 Release–Actions of the Board, Its Staff, and the Federal Reserve Banks; Applications and Reports Received

Category Action Taken
Forms Forms — initial Board review to extend with revision the Savings Association Holding Company Report (FR H-(b)11).

-Proposed, July 14, 2016

 

Regulations and Policies Community Reinvestment Act — final new and revised interagency questions and answers regarding community reinvestment.

-Approved, July 5, 2016

(A/C)

Minority Depository Institutions — annual report to Congress on preserving minority depository institutions, in accordance with the Dodd-Frank Act.

-Approved, July 15, 2016

 

Prepaid Cards — annual report to Congress on government-administered, general-use prepaid cards, in accordance with the Dodd-Frank Act.

-Approved, July 6, 2016

(A/C)

Rules of Practice for Hearings — interim final rule to adjust the Board’s civil monetary penalties to account for inflation, and determination that notice and comment procedures are unnecessary prior to adoption of the interim final rule.

-Approved, July 5, 2016

(A/C)

 

Enforcement Northpointe Bancshares, Inc., Grand Rapids, Michigan — written agreement dated January 21, 2009, terminated July 12, 2016.

-Announced, July 14, 2016

 

Federal Reserve Board: Balance Sheet (H.4.1 Release)

The Board publishes data of factors affecting reserve balances. The digest is called the H.4.1 Release, and they are published every Thursday (or the next business day if the publication date falls on a federal holiday). The release for July 21, 2016, is below.

[Note: The blog will cover the line titled “Total Factors Supplying Reserve Funds.”]

H.4.1 Release–Factors Affecting Reserve Balances

Total factors supplying reserve funds (as of July 20, 2016):  $4,526,668 (in millions of dollars). (On September 26, 2007, this amount was $900,473 (in millions of dollars)).

(See the release for further information.)