Mark Roe writes about the role of the NY Fed in the Federal Reserve System.  He questions the Fed’s role in regulation and suggests some changes.

“The New York Fed also has a particularly important role in bank supervision – most of America’s “too big to fail” banks are located in its jurisdiction (and most global banks have a presence there). And the New York Fed has long been the Fed System’s eyes and ears on Wall Street.
Or perhaps it has become the other way around. At least over the past decade, senior New York Fed officials have consistently sided with the interests of very large banks. (To be clear, I also know many Fed officials who are outstanding public servants). Though Wall Street interests have long been well represented on the board of the New York Fed, under Timothy Geithner, its president from 2003 to 2009, the big players became even more powerful – with some rather unfortunate consequences for the rest of us.
In his recent memoir, Stress Test, Geithner says, “I basically restored the New York Fed board to its historic roots as an elite roster of the local financial establishment.” His choices included Dick Fuld, CEO of Lehman Brothers, which failed spectacularly in September 2008, and Stephen Friedman, a Goldman Sachs board member, who resigned as chair of the New York Fed’s board after being accused of inappropriately trading Goldman stock during the financial crisis. Geithner also established a tangled web of connections between the New York Fed and JPMorgan Chase, some of which linger to this day.
Some senior Fed officials become angry when pressed about this reality. But the Fed’s legitimacy – and its ability to make sensible policy – is not boosted by having major banks represented, directly or indirectly, on a board that chooses and oversees a key policymaker.
Now, finally, US politicians on both the left and the right are focusing their attention on a long-overdue reform of the Fed’s governance. One important proposal comes from Senator Jack Reed, a Democrat from Rhode Island, who proposes, quite reasonably, that the president of the New York Fed should be nominated by the president and confirmed by the Senate, just like members of the Board of Governors – or any other important economic policymaker. The president of the New York Fed would also be required to testify before Congress on a regular basis.