Bessent to impose residency requirements for regional presidents of US federal banks | Economic and commercial news

The move is another attempt by the Trump administration to exert more control over the U.S. Federal Reserve, which historically has been freed from day-to-day politics.

U.S. Treasury Secretary Scott Bessent said he would advocate a new requirement that regional Federal Reserve bank presidents reside in their districts for at least three years before taking office, a move that could give the White House more power over the independent agency.

In his comments at the New York Times DealBook Summit on Wednesday, Bessent said “there’s a disconnect with the structure of the Federal Reserve” and added that “unless someone has lived in their district for three years, we’re going to veto them.”

Bessent has stepped up his criticism of the Fed’s 12 regional bank presidents in recent weeks after several of them made clear in a series of speeches that they opposed a cut in the Fed’s key rate at its next meeting in December. US President Donald Trump sharply criticized the Fed for not lowering short-term interest rates more quickly. When the Fed cuts rates, it can, over time, reduce borrowing costs for mortgages, auto loans and credit cards.

The prospect of the administration “vetoing” regional bank presidents would represent a new effort by the administration to exert more control over the Fed, an institution traditionally independent of day-to-day politics.

The Federal Reserve seeks to control prices and support hiring by setting a short-term interest rate that influences borrowing costs across the economy.

Complicated structure

The Fed has a complex structure that includes a seven-member board of governors based in Washington as well as 12 regional banks covering specific districts across the United States. The system, outlined in the Federal Reserve Act, was designed to ensure that U.S. central bank policy reflects input from officials across the country, not just political appointees in Washington.

The Federal Reserve Act does not impose any residency requirements on regional bank presidents. Regional Fed banks have repeatedly asserted that when selecting their new leaders, their decision-making was based on merit and ability.

The seven governors and the president of the New York Fed vote on each interest rate decision, while four of the remaining eleven presidents take turns voting. But all presidents participate in meetings of the Fed’s interest rate-setting committee.

Bessent, who is in the process of selecting a candidate to recommend to Trump to succeed Fed Chairman Jerome Powell, said the fact that many current regional bank presidents were hired from outside their districts is at odds with the spirit of the design of the U.S. central bank system.

Bessent said last month in an interview on CNBC that the reason for regional Fed banks was to bring their districts’ perspectives to the Fed’s interest rate decisions and to “break New York’s grip” on setting interest rates.

But now, he said last month, “three, maybe four” of the Fed chairs have been appointed outside their districts, some living in New York.

“I’m not sure that’s how the Federal Reserve was designed,” Bessent said in the interview.