War Powers
It’s Bernanke’s ball, and he’s taking it and running with it:
The Federal Reserve’s interest-rate target is getting close to zero, and so is the power of the Fed’s regional bank presidents.
The district chiefs’ authority over borrowing costs has been marginalized in the past two months as Chairman Ben S. Bernanke and the Fed Board of Governors in Washington made their own decisions on emergency measures to flood the economy with cash.
“The Board has usurped authority,” said William Poole, former president of the St. Louis Fed and now a senior fellow at the Cato Institute in Washington. “This dramatic change in policy direction has not been announced or even acknowledged.”
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A conference call last month showed how little say the central bank’s 12 regional presidents now have in some of the Fed’s biggest decisions.
The regional bank chiefs were invited to listen as officials in Washington outlined their decision on a new $600 billion program to help the housing market. The presidents weren’t asked to vote on the initiative, even though it aimed at cutting borrowing costs, something they vote on in regular FOMC meetings.
“If I am a regional Fed bank president, I have had my power diminished a lot,” said Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc. in New York, who used to work at the New York Fed. “I think of it as war powers for the Board of Governors.”
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