Spitzer: The uberclass runs the New York Fed to benefit megabanks, not the public

Most Americans think the Federal Reserve is part of the U.S. government. It’s not. Fed banks are private bankers' banks run by and for large banks. Eliot Spitzer explains why Fed decisions are made in large banks' interests rather than the public interest:

Just as the millions in AIG bonuses obscured the much more significant issue of the $70 billion-plus in conduit payments authorized by the N.Y. Fed to AIG’s counterparties, the small issue of Friedman’s stock purchase raises very serious issues about the competence and composition of the Federal Reserve of New York, which is the most powerful financial institution most Americans know nothing about…

The board consists of nine individuals, three chosen by the N.Y. Fed member banks as their own representatives, three chosen by the member banks to represent the public, and three chosen by the national Fed Board of Governors to represent the public. In theory this sounds great: Six board members are “public” representatives.

So whom have the banks chosen to be the public representatives on the board during the past decade, as the crisis developed and unfolded? Dick Fuld, the former chairman of Lehman; Jeff Immelt, the chairman of GE; Gene McGrath, the chairman of Con Edison; Ronay Menschel, the chairwoman of Phipps Houses and also, not insignificantly, the wife of Richard Menschel, a former senior partner at Goldman. Whom did the Board of Governors choose as its public representatives? Steve Friedman, the former chairman of Goldman; Pete Peterson; Jerry Speyer, CEO of real estate giant Tishman Speyer; and Jerry Levin, the former chairman of Time Warner. These were the people who were supposedly representing our interests!

…[W]hat we have seen [from the New York Fed’s Board] is disastrous groupthink, a way of looking at the world from the perspective of Wall Street and Wall Street alone.

Posted by James on Thursday, May 07, 2009