We hear about the FOMC periodically. Everyone tunes in for their meeting. But, little attention is paid to the committee between their meetings. There are things afoot right now.
The Board of Governors of the Federal Reserve is required to have seven members. It presently has three. Two of the current governors were put into their position by President Trump. Two more have been nominated by the president and are awaiting confirmation by the Senate. After these two are put on the Fed’s board, the president will then nominate two more to follow them.
In essence, it is possible that six of the seven Board members will be put in place by Trump.
Why is this important?
After the housing crisis late in the first decade of the 2000’s, the Fed was given enormous power to regulate the banking industry. The Fed set up a system that would penalize banks that failed to obey its new rules.
These rules included:
Setting limits as to how big an individual bank could be.
How much money the banks have to invest in Fed Funds and Treasury instruments as a percent of their assets.
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Which loans were desirable and which were not.
Where the banks could obtain their funding.
Who the President nominates and who is confirmed will be very telling for the compass of the committee moving forward.
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