Other banks and corporations represented at the regional or branch level include Bank of America, Boyd Gaming, Shorenstein Properties, Dow Chemical, Nissan, AutoNation, USAA, IBM, Southwest, JC Penney, USG, Nissan, along with energy and lumber companies and some of the legal and accounting firms that serve the country's megabanks.
Of nearly 250 Board members for the Fed's regions and branches, I was able to identify only three union representatives (from the AFL-CIO), one or two pension fund representatives (pension funds have been robbed blind by the big banks), and one member of a housing coalition. The Fed's boards have become more exclusive than a country club -- and a lot more powerful.
Federal Case
Why do we even have a Federal Reserve? There are people -- mostly libertarians of the Ron Paul school -- who think it should be abolished. They're wrong. We need a central bank. The financial crises which peppered our early history proved the need for a secure dollar backed by the "full faith and credit" of the United States government.
Panics like the one that led to William Jennings Bryan's famous "Cross of Gold" speech were led by speculators who became wealthy at the expense of working people and farmers. Back in the 19th Century many banks issued their own dollars, leaving both buyers and sellers unsure of their value from day to day. Anybody who had been holding "Lehman Brothers dollars" would be out of luck today.
So the question isn't whether we need a central bank: We do. The question is, Why is it dominated by the people who have already ruined the economy once -- and who have a clear conflict of interest?
The World's Biggest ATM
Give a bunch of bankers access to the world's biggest ATM and look what happens: As Bloomberg News reported last August, "Wall Street's aristocracy got $1.2 trillion in secret loans" from the Federal Reserve.
What the Federal Reserve hasn't done is carry out its mission, which the Fed's own "Purposes and Functions" document describes as:
- conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates
- supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers
- maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
- providing financial services to depository institutions, the U.S. government, and foreign official institutions ...
When it comes to that last bullet point the Fed's knocked it out of the park, especially for the banks. The other goals? Not so much.
Scoring the Fed
Let's rate the Federal Reserve according to the parameters it set out for itself:
- "Maximum employment": Thanks to the Fed, banks have had access to free or very-low-cost money, which they've used to make money on Treasuries and other safe investments. But they haven't been lending it to the consumers and small businesses who are the engines of job growth.
- "Stable prices": Gas prices keep swinging up and down radically because of speculation.
- "Moderate long-term interest rates": Yes -- but is that good? Opinions vary.
- "Safety and soundness of the nation's banking and financial system": JPMorgan Chase's recent debacle shows how little the Fed has accomplished here. but then, how easy can it be to rein in Jamie Dimon when he's chairing the meeting?
- "Protect the credit rights of consumers": Massive mortgage fraud by major banks. One settlement after another for deceiving consumers. How much time do you have?
- "Maintaining stability ... containing systemic risk": JPMorgan Chase's latest debacle settles this issue once and for all ...
... By any objective measurement, the Federal Reserve has failed to do meet these key objectives, and the composition of its boards is one of the reasons why.
The Radical Fed
Is it any wonder that the Fed gave out more than a trillion dollars to Wall Street's biggest banks -- and did it in secret? (That alone would appear to violate securities law, since it allowed bankers like Jamie Dimon to materially misrepresent the financial condition of their corporations.)
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