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Monday, September 21, 2009

Who needs the Federal Reserve Bank of Philadelphia?

Back when the government set up the Federal Reserve central banking system in 1913, Americans were so suspicious of Manhattan bankers and Washington bureaucrats that Congress set up regional Federal Reserve Banks in Philadelphia and other cities to give the regions a voice. The Philly Fed says its board still collects "grass roots information on business, agricultural, and financial conditions" for national policymakers.

Last week the Fed named Charles Pizzi, chief executive of Tasty Baking, former president of Philadelphia's chamber of commerce, onetime city commerce director, as the Federal Reserve Bank of Philadelphia's next board chairman. I called him at his new office at the Naval Business Center, where he's moving Tasty from North Philly.

"First and foremost, the mission is to provide a healthy economic environment," Pizzi told me. "Low inflation. High employment. The board is an important element of the system.

"We have nine directors who have come from a diversity of backgrounds and interests." Five are businessmen, four are financiers.  "I had the opportunity of working in government and at the chamber with all the various business sectors. Now I'm a local manufacturer. I try to use my background and experience as it relates to today's economic conditions.

"For example, last week we had a board meeting to provide information about the conditions and talk about monetary policy. Charles goes this week to the Fed’s Open Market Committee and feeds our personal observations to the Board of Governors.

Did he tell Plosser what Bernanke ought to do differently? "I leave it up to Charles. That's his fulltime job."

Is this helping Philadelphians get heard in Washington and Wall Street? President Obama wants to know. Reports Bloomberg News, "The Obama administration proposed on June 17 a financial- regulatory overhaul including a 'comprehensive review' of the Fed’s 'ability to accomplish its existing and proposed functions' and the role of its regional banks," including Philadelphia, which employs 910 (check processors, bank examiners, economists) at its secure Independence Mall headquarters.

But it's not happening. "Some top central bank officials, after agreeing to the review, saw a potential threat to Fed independence after the Treasury released the proposal," Bloomberg wrote here. “The Fed was created by Congress, and it is not part of the executive branch," former Atlanta Fed research director Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Vineland, told Bloomberg.

Some in Congress "have also called for a review of the Fed’s power and structure, saying Fed Chairman Ben S. Bernanke overstepped his authority as he bailed out creditors of Bear Stearns Cos. and American International Group Inc. while battling a crisis that led to $1.62 trillion in writedowns and losses at financial firms." But with the Fed resisting White House analysis, "no work has been done on the project, which was due Oct. 1."
 
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About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column in the Philadelphia Inquirer. Joe has been a member of Bloomberg LP’s New York Finance Team, wrote the book “Comcasted,” taught writing at St. Joseph’s University, and studied economics and history at Penn. Reach Joe at 215-854-5194 and JoeD@phillynews.com
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