CONTENTS Part 1-Depository Institutions and Housing_. 1. "Housing and Financial Reorganization," by Dr. Craig Swan, the FINE Study. 4. "Credit Unions as Viable Financial Intermediaries," by Dr. David I. Part 2-Regulation of Depository Institutions__ -- 1. "The Structure of Federal Regulation of Depository Institutions," 2. "Opportunity and Responsibility in a Financial Institution," by Dr. Donald D. Hester, Professor of Economics, University of 3. "Financial Innovation and EFTS: Implication for Regulation," by York University. 4. "Bank Trust Departments and Public Policy Today," by Roy A. Schotland, Professor of Law, Georgetown University Law 5. "Bank Holding Companies and Public Policy Today," by Roy A. 6. Questionnaire: Questions on Regulation and Supervision of Banks, submitted to the Federal Banking Agencies by the Banking, Cur- rency and Housing Committee and the Subcommittee on Finan- cial Institutions Supervision, Regulation and Insurance, U.S. Answer: Comptroller of the Currency-- Answer: Board of Governors of the Federal Reserve System. Part 3-Structure and Operations of the Federal Reserve System. 1. "The Structure and Operations of the Federal Reserve System: 1. "Foreign Bank Activities in the United States," by Jane D'Arista, 2. "U.S. Banks Abroad," by Jane D'Arista, Professional Staff Mem- 27 93 101 117 143 145 193 233 731 801 (V) THE STRUCTURE AND OPERATION OF THE FEDERAL RESERVE SYSTEM: SOME NEEDED REFORMS (By Thomas Mayer) 1 INTRODUCTION AND SUMMARY This study evaluates the Federal Reserve's structure and presents a number of proposals for making it more consistent with its present functions. Two main beliefs underlie these proposed reforms. One is that to isolate the Federal Reserve from partisan political pressures it needs a substantial degree of independence. However, this independence should not extend to allowing it to select its own goals independently of those preferred by elected officials. Second, the Federal Reserve's independence does not require it to have, as it does at present, a quasi-private component. It carries out extremely important governmental functions, and should be fully a public agency, rather than considering itself as only quasi-public. Hence, the following changes are recommended: 1. The Federal Open Market Committee should meet with the President once every two years (and more frequently if very special circumstances require this) to obtain an indication of his goals. It should then be required to accept these goals as its own unless it appeals successfully to Congress. 2. The stock in the Federal Reserve Banks which is presently owned by member banks should be retired. 3. The Board of Directors of the Federal Reserve Banks should be transformed into a management and economic advisory council. 4. The presidents of the Federal Reserve Banks should increase their contacts with a broad spectrum of the public, and should consider using a formal advisory council for this purpose. 5. The presidents of the Reserve Banks should be chosen by the President (with the advice and consent of the Senate) from a list of three candidates selected by a bipartisan committee. 6. Instead of having the presidents of the Reserve Banks serve in rotation on the FOMC, they should serve on it permanently but with fractional votes. 7. If recommendation (6) is not adopted, the Federal Reserve should reconsider the appropriateness of having the New York Federal Reserve Bank permanently represented on the Federal Open Market Committee. And also the rotation of the Cleveland Bank on the FOMC.) 8. The Board of Governors should be cut to five members if its supervisory work is reduced. 1 Professor of Economics, University of California, Davis. A paper prepared for the FINE Study. The author is indebted for much helpful information to Governor Holland, Chairman Wilson President Balles and Senior Vice President Sims of the San Francisco Federal Reserve Bank, President Eastburn of the Philadelphia Federal Reserve Bank, Professors Sherman Maisel, William Poole and Larry Wade, and Dr. James Pierce, none of whom are, of course. responsible for any statements made here. He is also indebted for able research assistance to Mr. Robert Carter. |