Left takes aim at the Federal Reserve

Liberal activists are putting a target on the Federal Reserve for the 2016 elections, much to the delight of the Bernie Sanders campaign.

Denouncing an agenda that they say tilts toward Wall Street, members of the “Fed Up” coalition on Monday unveiled a set of reforms that would alter how the central bank does business.

{mosads}“No longer are we focused only on fixing the Fed’s monetary policy and internal governance positions,” said Ady Barkan, the group’s campaign director. “We are now beginning an effort to reform the Federal Reserve itself.

“Ask all of the presidential candidates what their plans are for the Federal Reserve,” he added in a call with reporters.

While touting its reform proposals, the group was joined Monday by a top policy official with Sanders, who has made criticism of Wall Street a cornerstone of his presidential bid.

Warren Gunnels, Sanders’s policy director, said the Democratic candidate was not yet ready to endorse the coalition’s proposal, needing more time to review it.

But Sanders has pitched his own Fed reforms, and Gunnels said the Vermont senator is “very passionate” about overhauling how the Fed does business. Gunnels said the central bank should delay raising rates any time soon.

“The Fed should not raise interest rates until unemployment is lower than 4 percent,” he said. “Raising rates must be done as a last resort, not to fight phantom inflation.”

The “Fed Up” coalition said it had reached out to every remaining presidential campaign with its reform proposal. None of the Republican campaigns responded, but the group has had “very substantive conversations” with staffers to Hillary Clinton, according to Barkan. 

“We urge Secretary Clinton to show leadership on this issue and hope that she will soon be coming out with her plan to reform the Federal Reserve,” he told The Hill.

Clinton’s campaign did not respond to a request for comment.

The leftward pressure on the Fed is coming at a critical time.

The bank is trying to step back from intense stimulus it injected into the economy after the financial crisis. It raised rates for the first time in nearly a decade in December, but so far has opted not to raise them any further at subsequent meetings. 

Looming over its deliberations is the presidential election. The central bank prides itself on its political independence, and any major decisions in the months to come could expose it to charges it is working to benefit one party or the other.

While many economic indicators are improving, many community groups like Fed Up argue that many middle-class and working-class Americans are feeling none of those gains. They point to stagnant wage growth and a low labor participation rate as evidence that the Fed has ample reason to continue boosting the economy.

The coalition’s reform proposal was written by Andrew Levin, a Dartmouth economist who spent two decades at the Fed, including time as a special adviser to Fed chiefs Ben Bernanke and Janet Yellen.

While most conservative critiques of the Fed center on how it conducts monetary policy, Levin focuses most of his fire on the dozen regional Fed banks scattered across the country. 

Levin argues that the regional institutions are undemocratic entities that hand bank executives huge influence at the Fed. The regional banks are directly backed by commercial banks, which occupy most of the seats on each regional bank’s board. In turn, those boards pick each regional Fed president, who at some point will hold a rotating spot on the Fed’s board, which handles the nation’s interest rates. 

Under Levin’s plan, regional Fed banks would have to solicit public input when selecting their presidents. Regional banks would be required to put together a list of candidates through input from both the public and public officials from their specific region. The plan calls for Fed banks to emphasize diversity, considering candidates across a range of racial, gender and educational backgrounds.

Levin highlighted that in the 100-year history of the Federal Reserve system, there has never been a black head of a Fed regional bank.

The unveiling of the reform plan came on the same day that Fed Chairwoman Janet Yellen met privately with President Obama to discuss the central bank’s work and the state of the economy.

High-ranking Republicans have been critical of the Fed, particularly for the unprecedented stimulus program it carried out under Bernanke. Top GOP candidates like Donald Trump and Ted Cruz have accused the Fed of harming the economy with its efforts, and Speaker Paul Ryan (R-Wis.) has also been a frequent critic of the bank.

Sanders occupies a fairly unique political position when it comes to the Fed. He was one of just two Democrats to back a vote earlier this year on a Republican bill that would subject the central bank to a full outside review.

Separately, Sanders has also pushed to “Audit the Fed,” and the Levin plan also includes a comprehensive annual review of the Fed’s operations.

The Vermont senator has floated his own Fed reform proposal, arguing in a December piece in The New York Times that the institution has been “hijacked” by bankers. His plan would limit the influence of the financial sector on selecting Fed officials and require the Fed to prioritize unemployment when considering interest rates. 

Fed officials have repeatedly resisted any efforts to change how it does business, frequently arguing that changes could render the central bank ineffective or subject it to improper political pressure.