U.S. Treasury Secretary Scott Bessent said on Dec. 3 that he is proposing a new mandate that would require the presidents of regional Federal Reserve banks to live in their districts for at least three years before taking office, the AP reported, adding that the decision, if approved, could give the White House more power over appointments at the independent central bank.
In comments at the New York Times’ DealBook Summit, Bessent criticized several of the Fed’s regional bank presidents, saying they did not come from the areas they now represent, a “disconnect from the original framework” of the Fed.
Bessent said three of the 12 regional presidents have ties to New York: Two previously worked at the New York Federal Reserve, while the third worked at a New York investment bank.
“So they represent their district?” he asked. “I’m going to start advocating, going forward, not backward, that regional Fed presidents must have lived in their district for at least three years.”
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What did Scott Bessent say about congressional approval?
Bessent added that he was unsure whether Congress would need to consider such a change. Under current law, the Washington-based Fed board can block the appointment of regional Fed presidents.
“I believe you would say if someone hasn’t lived in the district for three years, we’re going to veto them,” Bessent said.
Bessent has stepped up his criticism of the Fed’s 12 regional bank presidents in recent weeks after several made clear in a series of speeches that they opposed cutting the Fed’s key rate at its next meeting in December. President Donald Trump has sharply criticized the Fed for not cutting its short-term interest rates more quickly. When the Fed lowers its rate, it can lower borrowing costs for mortgages, car loans and credit cards over time.
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Significance if the White House gains more influence over Fed appointments
Adding a residency requirement for regional bank presidents would represent another effort by the White House to exert more control over the Fed, an institution traditionally independent of day-to-day politics.
The Federal Reserve tries to keep prices in check and encourage hiring by setting a short-term interest rate that affects borrowing costs throughout the economy. It has a complicated structure that includes a seven-member board of governors based in Washington, as well as 12 regional banks that cover specific counties across the United States.
Seven governors and the president of the New York Fed vote on every interest rate decision, while four of the remaining 11 presidents vote on a rotating basis. But all presidents attend Fed rate-setting committee meetings.
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Current Federal Reserve Bank Presidents
Regional Fed presidents are appointed by boards made up of local and business community representatives.
Three of the Fed’s seven board members were appointed by Trump, and the president is seeking to fire Governor Lisa Cook, which would give him a fourth seat and a majority. Still, Cook sued to keep her job, and the Supreme Court ruled she could stay in her job during the court battle.
Trump is also considering whether to replace Chairman Jerome Powell when his term ends in May. Trump said over the weekend that “I know who I’m going to vote for,” but said at Tuesday’s cabinet meeting that he won’t announce his choice until early next year. Kevin Hassett, Trump’s top economic adviser, is widely considered Trump’s most likely choice.
All three regional presidents that Bessent mentions are relatively recent appointees. Lorie Logan was named president of the Dallas Fed in August 2022 after serving in a senior position at the New York Fed as manager of the Fed’s multi-trillion dollar portfolio, mostly government securities. Alberto Musalem became president of the Fed St. Louis in April 2024 and was Executive Vice President of the New York Fed from 2014-2017.
Beth Hammack was named president of the Cleveland Fed in August 2024 after an extended career at Goldman Sachs.
Musalem is the only one of the three who currently votes on policy, and he supported the Fed’s rate cuts in September and October. But he indicated last month that with inflation elevated, the Fed probably wouldn’t be able to cut much more.
Logan said she would vote against an October rate cut if she were to vote, while Hammack said the Fed’s key rate should remain high to fight inflation. Both Hammack and Logan will vote on rate decisions next year.
Bessent argued in an interview with CNBC last month that the reason for the Fed’s regional banks was to bring the perspective of their districts to the Fed’s interest rate decision-making and to “break the New York hold” on rate-setting.
