Bernie Sanders, a self-described democratic socialist, has called on the US government to audit the Federal Reserve, prevent big bank executives from serving on its boards and force it to act with more transparency and in favor of small businesses.
The independent Vermont senator and Democratic presidential candidate laid out his plans for the US central bank in an Op-Ed in the New York Times. The contribution comes a week after Chair Janet Yellen announced that the Fed would raise a key interest rate from nearly zero to 0.25 percent ‒ the first rate hike in nearly a decade.
It was a move that Sanders decried at the time, and he began his Op-Ed once again slamming the announcement.
“Raising interest rates now is a disaster for small business owners who need loans to hire more workers and Americans who need more jobs and higher wages,” Sanders wrote. “As a rule, the Fed should not raise interest rates until unemployment is lower than 4 percent. Raising rates must be done only as a last resort ‒ not to fight phantom inflation.”
The unemployment rate remained at 5 percent in November, according to the Bureau of Labor Statistics.
Most of Sanders’ piece focused on how to “fundamentally restructure the Fed’s governance system” to eliminate conflicts of interest and to refocus on its primary mission of serving all Americans, not just Wall Street bankers.
To start, the Democratic presidential hopeful recommended that board members for the regional Federal Reserve Banks be nominated by the president and approved by the Senate, with banking industry executives no longer eligible for any positions that are in charge of regulating financial institutions.
“If I were elected president, the foxes would no longer guard the henhouse,“ Sanders wrote, noting that, in 2016, “four of the 12 presidents at the regional Federal Reserve Banks will be former executives from one firm: Goldman Sachs.”
He also suggested that regional board positions “should instead include representatives from all walks of life ‒ including labor, consumers, homeowners, urban residents, farmers and small businesses.”
Sanders also suggested ways to change how the commercial banks, which the Fed regulates, do business, including prohibiting them from “gambling” with their customers’ deposits. He recommended that the central bank stop providing incentives to banks to stock excess reserves at the Fed ‒ “reserves that have grown to an unprecedented $2.4 trillion” since the Fed began the practice in 2008, he wrote ‒ instead of reinvesting that money in the economy.
The third part of Sanders’ plan is to force large banks to helping the average American as a condition of receiving financial assistance from the Fed. This help includes increasing lending to creditworthy small businesses and consumers, reducing credit card interest rates and fees, and providing help to underwater and struggling homeowners.
Finally, Sanders called on the Fed to…