Two senators on opposite ends of the Democratic caucus spectrum are circulating a letter pressuring President Obama to appoint governors to the Federal Reserve who reflect the interests of the middle class and small businesses rather than Wall Street.
Sen. Bernie Sanders (I-Vt.), a self-described democratic socialist, has been intensely critical of the Fed's failure to reduce unemployment and its failure to regulate the financial services industry leading up to the crisis. He's joined by Sen. Jim Webb (D-Va.), a conservative Democrat who voted to back Chairman Ben Bernanke's most recent confirmation to a second term.
The letter is being circulated through the Senate in search of additional signatures and was provided to HuffPost by an aide in a third office.
Obama has an opportunity to fill a vice-chair position and two governor spots on the Federal Open Market Committee. All three positions are powerful ones and could help shape the Fed in a new mold.
Specifically, the senators are calling on Obama to appoint people who would put a cap on usurious interest rates charged by credit card companies, want to reduce the size of banks, focus on unemployment and extend credit to small businesses.
The letter, along with one from Sen. Sherrod Brown (D-Ohio) Wednesday, puts Obama on notice that a bank-friendly appointee will face a tough time getting confirmed.
Read the full letter:
March __, 2010
The Honorable Barack Obama
President of the United States
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500
Dear President Obama:
As you know, you will soon have the historic opportunity to nominate three candidates to the Federal Reserve Board of Governors. At this moment of great economic pain for millions of working families, we strongly urge you to appoint candidates to these positions who will fight to protect the interests of the American middle class and small businesses.
American families are currently living through the worst economic crisis since the Great Depression. Millions of workers have lost their jobs, homes, life savings, and their ability to send their kids to college. While the $700 billion Troubled Asset Relief Program (TARP) and the extraordinary actions taking by the Federal Reserve have greatly benefitted [sic] executives on Wall Street, much more needs to be done to rebuild the middle class and small businesses living on Main Street.
Decisions by the Federal Reserve can have a major impact on whether the unemployment rate goes up or down; whether small businesses thrive or go out of business; whether the foreclosure rate goes up or down; and whether big banks charge reasonable or usurious interest rates and fees for credit cards and other financial products.
The Federal Reserve has been given broad authority by Congress to protect consumers against unfair and deceptive financial products; to promote maximum employment; to maintain the safety and soundness of financial institutions; and to guard against systemic risk in financial markets.
Therefore, we believe that the nominees you choose to fill these important positions should be prepared to support the American people in the following areas:
1) Prohibiting usurious interest rates and fees. Right now, the Federal Reserve has the authority to ban unfair and deceptive financial products. This can and should include a prohibition on usurious credit card interest rates and fees. Millions of American consumers and small businesses are paying interest rates as high as 35 percent on their credit cards. At the same time, financial institutions are able to borrow money from the Federal Reserve with virtually no interest at all. This is extremely unfair. We hope that you will pick nominees for these positions who will do everything within their authority to end the outrageously high interest rates that Americans are currently forced to pay.
2) Increasing lending to small businesses to create jobs. The Federal Reserve has the responsibility to conduct monetary policy in a manner that leads to full employment. The Federal Reserve can and should use this authority to provide direct loans to credit worthy small businesses at affordable interest rates and to provide community banks with the financing they need to offer affordable small business loans. We hope that your nominees to the Federal Reserve are committed to fulfilling the Fed's full employment mandate.
3) Reducing the size and risk-taking of large financial institutions so that they are no longer too-big-to-fail. The Federal Reserve has the authority and the responsibility to protect the safety and soundness of financial institutions and to guard against systemic risk in financial markets. We hope the nominees you choose for the Federal Reserve share the views of Paul Volker [sic] and other experts who believe that we need to "keep [banks] small, so that any failure won't have systematic importance."
4) Increasing transparency at the Federal Reserve. It is important that whoever is nominated to the Federal Reserve is committed to making the central bank more transparent. Since the start of the financial crisis, the Federal Reserve has provided over $2 trillion in virtually zero interest loans to the financial sector and large corporations, but has not disclosed the names of the recipients or the exact terms of this assistance. That is unacceptable. We need people at the central bank who understand that this money does not belong to the Federal Reserve. It belongs to the American people, and the American people have the right to know how that money is being spent.
5) Lowering the foreclosure rate. The foreclosure rate is still the highest on record, turning the American dream of homeownership into the nightmare of foreclosure for too many American families. The Federal Reserve has the ability to reduce the foreclosure rate and keep people in their homes. We hope your nominees will be committed to supporting policies at the central bank that will significantly reduce the number of foreclosures in this country.
6) Prohibiting excessive compensation packages at financial institutions. Last year, big banks and Wall Street firms that are now regulated by the Federal Reserve provided tens of billions in bonuses to CEOs and other executives. This is an insult to the American people who bailed them out and who continue to suffer economically as a result of their greed and recklessness. We need a Federal Reserve committed to ending the "heads banks win; tails taxpayers lose" compensation system. Rather, we should be moving toward a system that discourages compensation practices that reward excessive risk taking.
Thank you in advance for your consideration to this request. We look forward to working with you on this important issue.
United States Senator
United States Senator