Treasury Secretary Scott Bessent said Wednesday he would push a new requirement that the Federal Reserve‘s regional bank presidents live in their districts for at least three years before taking office, a move that could give the White House more power over the independent agency.
In comments at the New York Times’ DealBook Summit, Bessent said that “there is a disconnect with the framing of the Federal Reserve” and added that, “unless someone has lived in their district for three years, we’re going to veto them.”
Bessent has stepped up his criticism of the Fed’s 12 regional bank presidents in recent weeks after several of them made clear in a series of speeches that they opposed cutting the Fed’s key rate at its next meeting in December. President Donald Trump has sharply criticized the Fed for not lowering its short-term interest rate more quickly. When the Fed reduces its rate it can over time lower borrowing costs for mortgages, auto loans, and credit cards.
The prospect of the administration “vetoing” regional bank presidents would represent another effort by the administration to exert more control over the Fed, an institution that has traditionally been independent from day-to-day politics.
The Federal Reserve seeks to keep prices in check and support hiring by setting a short-term interest rate that influences borrowing costs across the economy. It has a complicated structure that includes a seven-member board of governors based in Washington as well as 12 regional banks that cover specific districts across the United States.
The seven governors and the president of the New York Fed vote on every interest-rate decision, while four of the remaining 11 presidents vote on a rotating basis. But all the presidents participate in meetings of the Fed’s interest-rate setting committee.
Bessent argued last month in an interview on CNBC that the reason for the regional Fed banks was to bring the perspective of their districts to the Fed’s interest rate decisions and “break the New York hold” on the setting of interest rates.
But now, he said last month, “three, maybe four” of the Fed presidents were appointed from outside their districts, with some living in New York.
“I’m not sure that’s the way the Federal Reserve was designed,” he said in the interview.
—Christopher Rugaber, AP economics writer