The New York Times has a full article on the history and policies of the Federal Reserve here.
The Sanders Report on the GAO Audit on Major Conflicts of Interest of the Federal Reserve can be found here.
Bernie Sanders website has a short version of his report called GAO Finds Serious Conflicts at the Fed found here.
And finally, Yves Smith at Naked Capitalism deals with other problems at the Fed in her article here. Below is an excerpt of her article:
Quelle Surprise! GAO Finds the Fed is a Club of Backscratching, Well Connected White Bankers
By Yves Smith - Naked Capitalism
The GAO released a report yesterday that provided some anodyne but nevertheless useful confirmation of many of the things most of us knew or strongly suspected about the Fed: it’s a club of largely white male corporate insiders who do a bit too many favors for each other. But the GAO seemed peculiarly to fail to understand some basic shortcomings of its investigation.
The report has the dry title FEDERAL RESERVE BANK GOVERNANCE: Opportunities Exist to Broaden Director Recruitment Efforts and Increase Transparency and is the result of an amendment to Dodd Frank by Bernie Sanders to audit the governance of the Fed. Sanders’ office published a useful list of highlights, such as:
The GAO identified 18 former and current members of the Federal Reserve’s board affiliated with banks and companies that received emergency loans from the Federal Reserve during the financial crisis including General Electric, JP Morgan Chase, and Lehman Brothers.
There are no restrictions on directors of the Federal Reserve Board from communicating concerns about their respective banks to the staff of the Federal Reserve.
Many of the Federal Reserve’s board of directors own stock or work directly for banks that are supervised and regulated by the Federal Reserve. These board members oversee the Federal Reserve’s operations including salary and personnel decisions.
Under current regulations, Fed directors 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 Fed loans; and the approval or disapproval of Federal Reserve credit to healthy banks and banks in “hazardous” condition.
The Federal Reserve does not publicly disclose its conflict of interest regulations or when it grants waivers to its conflict of interest regulations.
The report is very much worth reading. Roughly the first half discusses, in considerable detail, how the Fed is governed, for instance, the role of the regional Reserve Banks, how their Class A, B and C directors are selected. And a big chunk of the balance of the report, which the Sanders extracts ignored, discussed the lack of diversity in the key decisions makers at the Fed and discussed measures for improving that (the biggie was not taking people from the very top level of banks, since those are heavily white men, but from the next tier, which is more mixed).
This is an important issue, but not for the reason the GAO focused on. The Fed has always have the mandate of preserving the safety and soundness of the banking system, and later had the “dual mandate” added, of promoting price stability and full employment. It isn’t hard to see that the Fed has long been more interested in price stability, and Greenspan added a new mandate, which was that of preserving financial asset prices (note that that is also generally consistent with low interest rates).
Economist Joe Stiglitz has long advocated that labor should be represented on the Fed’s interest rate setting Open Market Committee, and this raises a point given short shrift by the GAO: the most important type of diversity missing from the Fed isn’t ethnic, racial, or gender, it’s class.
Read the entire article and see the charts here