In an election fueled by populist anger and dominated by talk of economic insecurity, why aren’t any of the presidential candidates talking about the Federal Reserve?
After nearly a decade of high unemployment, severe racial and gender disparities and wage stagnation, voters are heading to the ballot box in pursuit of a fairer economy with less rampant inequality. In California and New York, low-wage workers are celebrating historic agreements to raise the minimum wage to $15 per hour. And the economy and jobs consistently rank among the top concerns expressed by voters of all political stripes.
One government institution reigns supreme in its ability to influence wages, jobs and overall economic growth, yet leading candidates for president have barely discussed it at all. The Federal Reserve is the most important economic policymaking institution in the country, and it is critical that voters hear how candidates plan to reform and interact with the Fed.
The Fed too often epitomizes the problems with our economy and democracy over which voters are voicing frustration: Commercial banks literally own much of the Fed and are using it to enrich themselves at the expense of the American working and middle class. When Wall Street recklessness crashed the economy in 2008, American families paid the price.
At the time, JP Morgan Chase CEO Jamie Dimon sat on the board of the New York Federal Reserve Bank, which stepped in during the crisis to save Dimon’s firm and so many other banks on the verge of collapse. Although the Fed’s actions helped Wall Street recover, that recovery never translated to Main Street, where jobs and wage growth stagnated.
Commercial banks should not govern the very institution that oversees them. It’s a scandal that continues to threaten the Fed’s credibility. An analysis conducted earlier this year by my parent organization, The Center for Popular Democracy, showed that employees of financial firms continue to hold key posts at regional Federal Reserve banks and that leadership throughout the Federal Reserve System remains overwhelmingly white and male and draws disproportionately from the corporate and financial world.
When the Fed voted in December to raise interest rates for the first time in nearly a decade, the decision was largely driven by regional Bank presidents — the very policymakers who are chosen by corporate and financial interests. In 2015, the Fed filled three vacant regional president position, and all three were filled with individuals with strong ties to Goldman Sachs; next year, 4 of the 5 regional presidents voting on monetary policy will be former Goldman Sachs insiders. Can we trust these blue-chip bankers to address working Americans’ concerns?
Yet despite the enormous power it wields and the glaring problems it continues to exemplify, the Fed has received little attention this election cycle. As noted by Reuters last week, two of the remaining candidates for president, Hillary Clinton and John Kasich, have been mute on what they would do about the central bank. Donald Trump’s sporadic statements about the Fed have been characteristically short on details, prompting former Minneapolis Federal Reserve Bank President Narayana Kocherlakota to call for Clinton, Trump and all presidential candidates to clarify exactly how they plan to oversee the Fed’s management of the economy. Ted Cruz has piped up about the Fed on a few occasions, although his vocal endorsement of “sound money” and other policies that contributed to the Great Depression warrant clarification.
The most detailed Fed reform proposal from a presidential candidate to date was a December New York Times op-ed in which Bernie Sanders wrote that “an institution that was created to serve all Americans has been hijacked by the very bankers it regulates,” and urged vital reforms to the Fed’s governance structure.
On Monday, Dartmouth economist Andy Levin, a 20-year Fed staffer and former senior adviser to Fed Chair Janet Yellen and her predecessor Ben Bernanke, unveiled a bold proposal to reform the Federal Reserve and make it a truly transparent, publicly accountable institution that responds to the needs of working families.
The New York primary provides a perfect opportunity for the remaining presidential candidates to tell us what they think about the Federal Reserve. Candidates in both parties should specify whether they support Levin’s proposals, and if not, articulate their preferred approach for our federal government’s most opaque but essential institution.
As Trump, Cruz and Kasich gear up for a potentially decisive primary, they would do well to respond to the many calls for clarity on the Fed. And on Thursday night, Sanders and Clinton will have the chance to clarify their stances on the Fed when they debate in Brooklyn, just a few miles away from Wall Street and the global financial epicenter that is the New York Federal Reserve Bank.
As New York voters get ready to decide which of the remaining candidates would make the best president, they will be asking themselves which candidate will better handle the economy. The candidates’ positions on the Fed must be part of the equation.
Jordan Haedtler is campaign manager of the Fed Up campaign, which calls on the Federal Reserve to adopt policies that build a strong economy for the American public. Fed Up is an initiative of the Center for Popular Democracy, a nonprofit group that advocates for a pro-worker, pro-immigrant, racial and economic justice agenda.