Sec. 2. Findings
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Congress finds the following: In October 2011, the Government Accountability Office found that— allowing members of the banking industry to both elect and serve on the boards of directors of Federal reserve banks poses reputational risks to the Federal Reserve System; 18 former and current members of the boards of directors of Federal reserve banks were affiliated with banks and companies that received emergency loans from the Federal Reserve System during the financial crisis; many of the members of the boards of directors of Federal reserve banks own stock or work directly for banks that are supervised and regulated by the Federal Reserve System.
These board members oversee the operations of the Federal reserve banks, including salary and personnel decisions; under current regulations, members of a board of directors of a Federal reserve bank who are employed by the banking industry or own stock in financial institutions can participate in decisions involving how much interest to charge to financial institutions receiving loans from the Federal Reserve System, and the approval or disapproval of Federal Reserve credit to healthy banks and banks in hazardous condition; 21 members of the boards of directors of Federal reserve banks were involved in making personnel decisions in the division of supervision and regulation under the Federal Reserve System; and the Federal Reserve System does not publicly disclose when it grants a waiver to its conflict of interest regulations.
Allowing currently employed banking industry executives to serve as directors on the boards of directors of Federal reserve banks is a clear conflict of interest that must be eliminated. No one who works for or invests in a firm receiving direct financial assistance from the Federal Reserve System should be allowed to sit on any board of directors of a Federal reserve bank or be employed by the Federal Reserve System.