Prevent the "New York faction" from dominating monetary policy! US Treasury Secretary proposes new rule requiring regional Fed presidents to have lived locally for three years.

US Treasury Secretary Benson said on Wednesday that he will push for a new requirement that Federal Reserve regional presidents must reside in their jurisdiction for at least three years before taking office, a move seen by many as potentially giving the White House more influence in this traditionally independent institution. Benson pointed out that currently, many regional presidents are not from their respective jurisdictions, which deviates from the original design of the Fed. He emphasized that out of the existing 12 regional presidents, three have close ties to New York, two of whom have previously served at the New York Fed, and one comes from a background in New York investment banking, leading him to question whether they can truly represent the local economic interests. Benson stated that he will advocate for future regional presidents to reside in their jurisdiction for at least three years, rather than retroactively. He is unsure if Congress needs to be involved in amending the relevant rules, as existing laws already allow the Federal Reserve Washington Board to veto the appointment of regional presidents. He added, "I think you can say directly that we will veto anyone who has not resided in the jurisdiction for three years." In recent weeks, Benson has increased his public criticism of regional presidents, especially after several presidents openly opposed further rate cuts at the December interest rate meeting. President Trump has also criticized the Federal Reserve for not cutting rates more aggressively, with the government hoping that lowering rates will reduce financing costs for mortgages, car loans, and credit cards, providing more support for the economy. This move is seen as another signal of the White House's further attempt to influence internal Federal Reserve decisions. The Federal Reserve is composed of seven governors in Washington and 12 regional Fed banks across the US, with the seven governors and the New York Fed president having permanent voting rights at each rate decision meeting, while the other regional presidents rotate voting rights. Despite the rotation of voting rights, all regional presidents participate in policy meetings, giving them significant influence in policy formation. Regional presidents are nominated by boards of directors composed of local business and community leaders, then approved by the Federal Reserve Board of Governors. Trump has appointed three current governors and is trying to remove Governor Cook from her position, which would give him a fourth seat on the board. However, Cook has filed a lawsuit and the Supreme Court has allowed her to continue serving during the case. Additionally, Trump is considering nominees to replace Chairman Powell, whose term expires in May next year. He recently stated that he has "decided on a candidate," but will announce it early next year, with many believing that National Economic Council Director Kevin Hassett is the most likely successor. The three regional Fed presidents mentioned by Benson were all recently appointed: Logan of the Dallas Fed previously managed trillions of dollars in assets at the New York Fed; Mester of the St. Louis Fed was previously an executive vice president at the New York Fed, and is the only one of the three with voting rights this year; Hamrick of the Cleveland Fed comes from Goldman Sachs and has openly supported maintaining high interest rates to combat inflation. Despite their different backgrounds, all three demonstrate policy tendencies that contradict what the White House desires. Mester supported the rate cuts in September and October, but recently stated that there is limited room for further cuts in the current high inflation environment; Logan stated that he would have opposed the rate cut in October if he had voting rights at the time; Hamrick emphasized that rates should be kept high. Both Mester and Logan will have voting rights next year. Benson said in an interview last month that the establishment of regional Feds was meant to ensure that different regional economic viewpoints could influence federal-level rate decisions and prevent a "New York perspective" from dominating monetary policy. He is pushing for the "reside locally for three years" requirement in order to bring regional voices back into the decision-making center.