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October 21, 2011 at 10:47 AM
A new report from the Government Accountability Office, which details potential conflict of interest within the Federal Reserve, finds that the Fed is taking on additional risks to its reputation by allowing the banking industry to participate in choosing board members at the 12 regional Fed banks.
The report notes that while “the Federal Reserve System recently has made changes to Reserve Bank governance, it can take additional steps to strengthen controls designed to manage conflicts of interest involving Reserve Bank directors and increase public disclosure of directors’ roles and responsibilities.
As such, to enhance transparency in its leadership, the chairman of the Federal Reserve Board should “direct the Reserve Banks to make key governance documents, such as such as board of director bylaws, committee charters and membership, and Federal Reserve Board director eligibility policy and ethics policy, available on their websites or otherwise easily accessible to the public.”
“Failing to make the process and decisions more transparent can decrease confidence in the Federal Reserve System and has resulted in questions about the integrity of Reserve Banks’ operations and the appearance of conflicts of interest,” the GAO said.
