Insider: Federal Reserve Process Is Broken And Has Been For A While

The Federal Reserve process and its entire system needs a complete overhaul, at least according to Peter Fisher, an ex-Federal Reserve official.

Fisher held high ranking positions within the Federal Reserve, including running the New York Fed's open market desk and then as Treasury undersecretary for domestic finance under former President George W. Bush. As reported by MarketWatch, he delivered a scathing speech to the Shadow Open Market Committee last week.

The speech, titled "What's The Matter with the Fed?" focuses on his "discontent" with the Federal Reserve system.

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"I think something is wrong with monetary policy," the opening line read. "But my discontent has little to do with the level of the Fed Funds rate and much to do with ideas that frame the Fed's view of the world and the public's understanding of the Fed."

Fisher laid out the case for structural reform for the Federal Reserve, noting that the "decision-making process and communications are not consistent with what we can and should expect." He added, "Legislative reform is needed to improve both the individual accountability and the democratic accountability of those who have a say in our nation's monetary policy."

Currently, there are seven members of the Fed board of governors in Washington. There are also 12 regional Fed banks, which consist of presidents who are elected by the regional board.

Fisher's proposals include a complete overhaul of Fed members. He is suggesting that only the Fed chairman would remain in Washington and the 12 regional Fed banks be consolidated to eight. All nine of the Fed officials will also be appointed by the White House and confirmed by the Senate. The nine members would be solely responsible for implementing monetary policy decisions.

"With these changes, I believe we would have a Fed that is both more accountable to our elected representatives, and one that is more effectively independent of the political cycle," Fisher concluded.