Every time I write about the Federal Reserve I get phone calls from well-meaning old men who repeat to me something they read on the Internet or in a frantic paperback or heard on cable TV: that the Fed is an evil anti-democratic private conspiracy, owned and operated by the Rothschilds and Morgans and other old European banking families, which creates phony dollars out of nothing, to the ruin of free markets and true prosperity.
Back here on Earth, the actual Fed is run by a chairman and six henchmen appointed by the President and approved by the Senate. When they set target interest rates and attempt to intervene in the economy, they form the Fed's Open Markets Committee, assisted by five rotating representatives of the 12 Federal Reserve districts, a system designed by Congress to insure skeptical small business owners and other citizens that "Wall Street" wouldn't completely run the show.
And who runs these regional Feds? In Philadelphia, that would include, for example:
- Charlie Pizzi, chief executive of South Philly's own state-supported Tasty Baking Co.; former head of the local chamber of commerce and city commerce director; vice chairman of Independence Blue Cross, director of Drexel and of dominant local office landlord Brandywine Realty Trust. Pizzi was just re-appointed for another year as chairman of the Philly Fed board.
- R. Scott Smith Jr., chairman and chief executive of Fulton Financial Corp., the biggest bank still based in Lancaster, newly elected to the board.
- Jeremy Nowak, boss of the Reinvestment Fund, a nonprofit lender to charter schools and supermarkets, reappointed to another three-year term.
- Keith S. Campbell, chairman of Mannington Mills, the nonunion South Jersey fabric maker, was re-elected to the board.
And five others. Who appoints and elects these nine? Six are elected by local banks that are members of the Federal Reserve, including three, like Smith, who are bankers, and three, like Campbell, are typically businesmen, though in the past an occasional labor leader got through.
The other three members, including Pizzi and Nowak, are nonbankers (though Nowak's fund is a bank-like institution) appointed by the Fed's Board of Governors in Washington, headed by the Presidentially-appointed, Senate-approved chairman.
What does this board do? It's supposed to oversee the Philly Fed and its work examining the region's surviving banks. It's also responsible for naming the Philly Fed's day-to-day president, currently conservative economist Charles Plosser. Plosser is a critic of Ben Bernanke's potentially inflationary policies and his attempts to get people back to work, but also a defender of the Fed in its mission as an inflation-fighter. He's about to go back to Washington as a rotating member of the Open Markets Committee where he can fight Bernanke face-to-face. (Revised and Corrected)