Bankers Decide Their Own Regulations

The way that regional Federal Reserve boards are chosen leads to an inherent conflict of interest, says the Government Accountability Office in a new audit of the Fed. In a brilliant management move, each Fed board picks its members from local businesspeople and bankers. The problem, though, is that the bankers who are on the board help decide what the regulations on the banks that they work for should be.

According to the Washington Post, this means that “executives from Goldman Sachs, J.P. Morgan Chase, General Electric and other firms sat on the boards of regional Federal Reserve banks while their firms benefited from the central bank’s policies during the financial crisis.” In a particularly embarrassing example, the person who handled the bailout of Goldman Sachs had stock in none other than Goldman Sachs. No wonder everyone is so upset at Wall Street.

These systemic conflicts of interest could help explain why the government bailouts were so cushy for big banks, but did little to improve the lives of workers who may have lost their jobs, homes and wealth due to the recession. As we know, bankers sometimes forget that the world doesn’t actually revolve around them, and that what’s best for them may not be what’s best for everyone else. It just looks like there weren’t enough structures in place to make sure they didn’t lose sight of their own private balance sheets.

The GAO report has a lot of recommendations for how to improve the regional Fed boards. They include more clearly delineating what kinds of people can hold what positions and increasing diversity by appointing more women and minorities. Though these are certainly a start, the Fed is not going to regain its credibility or fix the economy until it starts looking out for all Americans, not just those in the top 1%.

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Photo from epicharmus via flickr.

139 comments

Toby S.
Toby S.4 years ago

You should read the Protocol of Zion. It's fiction... but enlightening.

Demian v.
Wendy V.4 years ago

It's incredible that even after the banks raped everybody financially that this can still be allowed... It's absolutely beyond me!!! Why is is that this life must constantly be about slavery, about raping the masses and bleeding them for they are worth? That 'they' get away with inpunity and just laugh and laugh all the way to the bank?

The moneytary system is flawed and what's even more amazing is that the system of charging interest on debt is not fair or right... What's even more amazing is that Americans claim to be the 'biggest Christians' on the planet yet their religious convictions clearly do not translate into the real world. You religious structure is for display and show only... Your Bible is clear on the fact that your are not allowed to charge interesty on debt... Unfortuantely this sick money grabbing behaviour is exported and all other supposed democratic systems adopt the same thing...

Sonny Honrado
Sonny Honrado4 years ago

Someone should regulate the banks.

Martha Eberle
Martha Eberle4 years ago

Just when you think you've heard it all .... Talk about the fox guarding the henhouse!

Toby S.
Toby S.4 years ago

You never answer the question Marg. How am I delusional or radical right...specifically?

Marg Wood
Marg W.4 years ago

You are so funny. Have you ever thought of doing stand up?

Toby S.
Toby S.4 years ago

Wow, I've been called about everything but not a delusional right wing radical. Thats a first for me.

Marg, you really do struggle with your athieism and should have mental help readily available.

Why would you make yet another attack on me? I seek the wisdom of all religion and celebrate our areas of common belief, not dwell upon where we differ. How does that make me a right wing radical or delusional?



Judith Howard
Judith Howard4 years ago

Kill the fed, not restructure it.

Patrick F.
Patrick f.4 years ago

Bankers are Wankers.....

Marg Wood
Marg W.4 years ago

My views are also shared by many Christians and other religions and non religions who are not right wing radicals living in a fantasy world. You are delusional! That is all I have to say on the subject.