#Reserve Banks

After my latest opinion piece appeared in Barron’s on Thursday, I was stunned by the virulence with which Barron’s readers — not exactly a bunch of Democratic Socialists — agreed with me not because of my reasoning, but because they believe the Fed in general and Jay Powell in particular are engaged in a sweeping conspiracy on behalf of the wealthiest global capitalists.  The new controversy over Reserve Bank president stock holdings only adds fuel to this fire.  Are Federal Reserve Banks forever?  Their history suggests maybe not.

Reserve Banks are creatures of 1913, created in concert with the Federal Reserve Board in Washington as part of the awkward compromise that persuaded those who feared a dominant federal banking powerhouse that the central bank would have roots outside the largest cities and thus be beyond the reach of New York’s powerful bankers.

This balancing act is in fact one reason the Board is headquartered in Washington, not New York, and also why the New York Fed is the most powerful among nominal equals when it comes to its fellow Reserve Banks.  The fundamental anachronism of the System is evident in its geographic footprint — a heavy concentration of Reserve banks up to Kansas City and St. Louis and then not a single Reserve Bank for all of the mountain and western states but the lone edifice still standing apart in San Francisco.

The ethics rules now at issue due to recent revelations are also artifacts of not just the Reserve …