Dodd Proposes Dramatic Shake-Up Of NY Fed

[ProSense]

Breaking: Dodd Proposes Dramatic Shake-Up Of NY Fed

by bobswern

According to a breaking story in the New York Times, over the past hour, we're learning that Senator Chris Dodd (D-CT) is proposing to put a saddle of historic proportions -- as part and parcel of his Senate Banking, Housing and Urban Affairs Committee's financial regulatory reform legislation -- on Wall Street's control of the New York Federal Reserve branch. (See: "With Nods to Both Sides, Dodd Will Introduce Bill.")

Dodd is proposing to wrest control of the appointment of the head of the NY Fed from its member banks and make it a White House appointment, instead. Another rule being proposed in the latest draft of his committee's financial regulatory reform legislation, to be unveiled tomorrow morning at 9:45AM, would prohibit member bank officers from sitting on the NY Fed's board.

This is huge and of great historical importance, and it may have something to do with a matter I covered in my diary from yesterday (see:" NYT: NY Fed, Ernst & Young Enabled Lehman; Others Involved"), although that's strictly my own conjecture. (Also see: "NY Fed Under Geithner Implicated In Lehman Acc't'g Fraud....")

According to this evening's NY Times' story...

With Nods to Both Sides, Dodd Will Introduce Bill
By SEWELL CHAN
March 15, 2010

WASHINGTON --

...according to people who have been briefed on the draft, is one that would curb Wall Street's power over the Federal Reserve Bank of New York. Its president would be appointed by the president of the United States, not by member banks.

Another rule would ban bank officers from sitting on the New York Fed's board, meaning that Jamie Dimon, chief executive of JPMorgan Chase, would probably have to leave the board.

The legislation would create a consumer protection agency within the Federal Reserve to write rules governing mortgages, credit cards and other financial products, said the people, who insisted on anonymity because the details were still in flux.
In a concession to liberals, states' attorneys general could sue violators of those rules, and the agency would have enforcement powers over large banks, mortgage originators and servicers, and other large lenders...

Ever since its founding in 1913, it's been more or less common knowledge that, for all practical purposes, the "Golden Rule" applies, and the New York Federal Reserve branch -- not the Federal Reserve Board -- really calls most of the shots when it comes to practical (behind-the-scenes formulation of) Federal Reserve banking and monetary policy. In this case, the "Golden Rule" being that Wall Street has the gold, so they call the shots. Period.

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[Trillo]

1. Power to coin money is given to congress, according to that "damned piece of paper"

So, why is it a "good thing" to give the appointment to the White House? Doesn't that increase the already excessive power of the Executive? Why not give that power to Congress?

[ProSense]

3. The executive makes SCOTUS appointments and

Fed appointments. They must be confirmed by Congress.

Seriously, for all the claims that Congress is owned by special interest, why on earth would anyone want them to make the appointments. How exactly would that work?

[LatteLibertine]

2. Bottom line

if there is no meaningful financial sector reform/regulation we will see another "crisis" like 2008. At least 90% of the same players that perpetuated the mess are still in the same industry doing the exact same thing. Socialize the losses and privatize the profits must cease. If the very wealthy want to take extraordinary risks with their own money and that of their friends, fine. They shouldn't be able to stick all taxpayers with the consequences of their poor decisions or outright scams.

[NJmaverick]

4. K & R