II 

112TH CONGRESS 

2D SESSION S. 3219 

To restrict conflicts of interest on the boards of directors of Federal reserve 

banks, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MAY 22, 2012 

Mr. SANDERS (for himself, Mrs. BOXER, and Mr. BEGICH) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To restrict conflicts of interest on the boards of directors 

of Federal reserve banks, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Federal Reserve Inde5 pendence Act’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 

8 (1) In October 2011, the Government Account9 ability Office found the following: 


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1 (A) Allowing members of the banking in2 dustry to both elect and serve on the boards of 

3 directors of Federal reserve banks poses 

4 reputational risks to the Federal Reserve Sys5 tem. 

6 (B) Eighteen former and current members 

7 of the boards of directors of Federal reserve 

8 banks were affiliated with banks and companies 

9 that received emergency loans from the Federal 

10 Reserve System during the financial crisis. 

11 (C) Many of the members of the boards of 

12 directors of Federal reserve banks own stock or 

13 work directly for banks that are supervised and 

14 regulated by the Federal Reserve System. 

15 These board members oversee the operations of 

16 the Federal reserve banks, including salary and 

17 personnel decisions. 

18 (D) Under current regulations, members of 

19 a board of directors of a Federal reserve bank 

20 who are employed by the banking industry or 

21 own stock in financial institutions can partici22 pate in decisions involving how much interest to 

23 charge to financial institutions receiving loans 

24 from the Federal Reserve System, and the ap25 proval or disapproval of Federal Reserve credit 


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1 to healthy banks and banks in ‘‘hazardous’’ 

2 condition. 

3 (E) Twenty-one members of the boards of 

4 directors of Federal reserve banks were involved 

5 in making personnel decisions in the division of 

6 supervision and regulation under the Federal 

7 Reserve System. 

8 (F) The Federal Reserve System does not 

9 publicly disclose when it grants a waiver to its 

10 conflict of interest regulations. 

11 (2) Allowing currently employed banking indus12 try executives to serve as directors on the boards of 

13 directors of Federal reserve banks is a clear conflict 

14 of interest that must be eliminated. 

15 (3) No one who works for or invests in a firm 

16 receiving direct financial assistance from the Federal 

17 Reserve System should be allowed to sit on any 

18 board of directors of a Federal reserve bank or be 

19 employed by the Federal Reserve System. 

20 SEC. 3. END CONFLICTS OF INTEREST. 

21 (a) CLASS A MEMBERS.—The tenth undesignated 

22 paragraph of section 4 of the Federal Reserve Act (12 

23 U.S.C. 302) (relating to Class A) is amended by striking 

24 ‘‘chosen by and be representative of the stockholding 

25 banks’’ and inserting ‘‘designated by the Board of GovVerDate Mar 15 2010 03:41 May 23, 2012 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S3219.IS S3219

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1 ernors of the Federal Reserve System, from among per2 sons who are not employed in any capacity by a stock3 holding bank’’. 

4 (b) CLASS B.—The eleventh undesignated paragraph 

5 of section 4 of the Federal Reserve Act (12 U.S.C. 302) 

6 (relating to Class B) is amended by striking ‘‘be elected’’ 

7 and inserting ‘‘be designated by the Board of Governors 

8 of the Federal Reserve System’’. 

9 (c) LIMITATIONS ON BOARDS OF DIRECTORS.—The 

10 fourteenth and fifteenth undesignated paragraphs of sec11 tion 4 of the Federal Reserve Act (12 U.S.C. 303) (relat12 ing to Class B and Class C, respectively) are amended to 

13 read as follows: 

14 ‘‘No employee of a bank holding company or other 

15 entity regulated by the Board of Governors of the Federal 

16 Reserve System may serve on the board of directors of 

17 any Federal reserve bank. 

18 ‘‘No employee of the Federal Reserve System or 

19 board member of a Federal reserve bank may own any 

20 stock or invest in any company that is regulated by the 

21 Board of Governors of the Federal Reserve System, with22 out exception.’’. 

23 SEC. 4. REPORTS TO CONGRESS. 

24 The Comptroller General of the United States shall 

25 report annually to Congress beginning 1 year after the 


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1 date of enactment of this Act to make sure that the provi2 sions in this Act are followed. 

Æ 


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