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Rep. Frank to Update Plans for FOMC Overhaul

Rep. Barney Frank (D-Mass.) is speaking out again on new legislation that would block regional presidents within the ""Federal Reserve"":http://www.federalreserve.gov/ system from voting participation in the ""Federal Open Market Committee"":http://www.federalreserve.gov/monetarypolicy/fomc.htm. Rep. Frank, author of the proposed bill, is seeking to replace five seats on the committee - those traditionally reserved for the presidents of regional Fed banks - with four hand-selected individuals, chosen by the president and confirmed by the Senate.

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Made up of 12 voting positions, the FOMC's body is typically comprised of seven members of the Federal Reserve governors, each of whom must gain Senate approval, and the regional presidents.

Rep. Frank's opposition to the current complexion of the FOMC stems from the fact that statistics from 2009 demonstrate that the five regional members accounted for more than 90 percent of all dissenting votes throughout FOMC sessions. More specifically, the regional presidents totaled 97 percent of all ""hawkish"" dissents, directed at policies regarding inflation protection.

The ranking member of the House Financial Services Committee struck out against the regional presidents recently,

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calling them ""representatives of private interests,"" and stating that their behavior wasn't a positive factor in ""this extremely important issue of public policy.""

However, the initiative proposed by Rep. Frank is under extreme criticism from Republicans in the Senate, most of whom are against all current candidates suggested for replacement membership in the FOMC. Members nominated for appointment to the FOMC have included noted professionals such as Peter Diamond, Nobel Prize winner and MIT economist, who withdrew his candidacy following repeated refusals from Republicans. The Senators who blocked Diamond's nomination cited improper qualifications as the reason behind their opposition.

Within the FOMC, there is much division over current issues, and the committee's June meeting resulted in the highest number of dissenting votes in more than two decades, for a total of three; the regional presidents were responsible for each of the dissents and the members in question claimed an inappropriate timeline was to blame. Major economic issues on the table for the FOMC now include the reduced interest rate initiative, slated for a two-year continuance, and the nation's larger economic recovery plan.

Rep. Frank's original version of the bill simply eliminated the five seats held by regional presidents, in favor of a smaller body, but it was quickly dismissed by many on Capitol Hill, fearing the lack of diversity within the FOMC. Rep. Frank is also said to be working on an updated version of the legislation for consideration; the fresh bill would allegedly call for the four seats in question to be nominated by the president, but would mandate that the four members come from outside of Washington, D.C.

At present the FOMC has two vacancies, neither of which has been filled due to the on going tension with Senate Republicans. The next scheduled meeting for the FOMC is set for Sept. 20 and 21.

About Author: Abby Gregory

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