Ranking Member of the House Financial Services committee, Barney Frank appeared on CNBC last Wednesday to explain the rationale behind his newest piece of proposed legislation--a bill which would remove the 4 rotating members of the regional Federal Reserve Banks from the 12 member Federal Open Markets Committee. The President of the New York Federal Reserve is a permanent member so apparently he would get to stay. Frank wants these regional rotating members stripped of their voting rights and replaced because "they are chosen by the private banks without input or oversight from any governing body."
"I think it's fine for them [the representatives of private banks] to sit in, but setting interest rates...that's a public function. The Federal regional presidents are picked by private citizens. It really is totally inconsistent with any kind of theory of democracy," says Frank in his interview. When questioned about the wisdom of not allowing the banking entities that have to work within the framework of the interest rates, to have a place at the table, Frank responded that they can have input but they should not be able to vote on an issue that they can potentially profit from.
I have posted the link here to the interview. It is really worth watching.
So what would Frank consider to be more in keeping with the principals of democracy? "I would have the people appointed by the president and confirmed by the Senate be voting members. I just think it's totally inconsistent with any theory of democracy to have purely private citizens sending people to vote on interest rates." However, appointees of the president represent the people who need to get mortgages and consumer loans, so this is completely in keeping with democracy, according to Frank.
Frank's steadfast determination to see the directors of financial policy appointed by the president and confirmed by the Senate is interesting given the fact that last year, when interim director of the Consumer Financial Protection Bureau Elizabeth Warren faced a tough uphill battle for confirmation in the Senate, Frank stated in an interview with the Huffington Post that if Ms. Warren could not get Senate confirmation, the president should just appoint her using a recess appointment while the Senate was away on vacation. "Given the way [the Senate has] misused the filibuster...given it's anti-Democratic, I think the President did exactly the right thing with Donald Berwick," said Frank in his interview. (Donald Berwick received a recess appointment to head the Centers for Medicare and Medicaid Services.)
Warren was named interim director of the CFPB last year, but the Mortgage Bankers Association is speculating that this year the White House will use a recess appointment to give Warren the top job as the head of one of the nation's most powerful new agencies.
Following that logic, if the President has appointees for the Federal Reserve board who are unlikely to pass confirmation, he can just appoint them as recess appointments when the Senate is on vacation. That's not undemocratic at all.
Listening to Frank just makes me wonder what political science courses he took in school and how his teachers explained the concept of democracy to him in the first place.
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