Wallace Turbeville — Regulatory Capture of the New York Fed: How Can Banks Capture What They Already Own?

One is tempted to say that the financial sector does not need to capture the New York Fed. It already “owns” it. 

It is important to distinguish the Fed Board of Governors and the Washington staff from the New York Fed. The twelve regional Feds are separate entities, and the most important is the one in New York because it is at the epicenter of the industry. The regional Feds are not governmental entities. In fact they are not “regulators” in the sense of the SEC or the Food and Drug Administration. The regional Feds do not report to a government official or agency. Majorities of their boards are chosen by the member banks themselves. Here is how the New York Fed Board breaks down. 

1. One third of the members are bankers. For example, Jamie Dimon was a board member from January 2007 through 2012, encompassing both the financial crisis and the events reported by This American Life.
2. One third of the members are representatives of business elected by member banks (the founder of Silver Lake Partners – a private equity firm - and the Chairmen/CEOs of Honeywell and Macys).
3. One third of the members are appointed by the Federal Reserve Board (the Presidents of the Metropolitan Museum of Art and Rockefeller University the founder of the Freelancers Union).

Of course, the practitioner members have disproportional influence because of their superior information and expertise. And the business representatives must be sympathetic to the banks which elected them. It is not difficult to imagine how debates inside the New York Fed board play out.

Demos — Policy Shop
Regulatory Capture of the New York Fed: How Can Banks Capture What They Already Own?
Wallace Turbeville