Restoring the board to its rightful balance
Following Jeremy Stein’s announcement that he would be resigning from the Federal Reserve Board of Governors, both sides of the Senate’s aisle have begun urging President Barack Obama to consider appointing someone with community banking experience to fill his seat.
Recent years have seen a shift in the seven-member board to more academic and economics-focused individuals. While these areas of expertise undoubtedly provide value, there is an almost unanimous bipartisan movement to return the board to its community banking roots, according to a recent article by the Wall Street Journal.
Traditionally, at least one member of the Board of Governors has had tangible community banking experience. However, in recent years both Elizabeth Duke and Sarah Bloom Raskin, both of whom have substantial housing and community banking expertise, have also left the board.
But why is it so important to keep someone on the board who has a special interest in community banks?
Recent consolidation trends have led to a decrease in community banks, however, much like the small businesses they support, they are a critical foundation of our economy. Even though the share of deposits has drastically shifted to larger “megabanks” in recent years, community banks are still the primary lenders for agricultural and rural regions.
It is because of their heavy involvement in agricultural and small business lending that it is so important to have someone on the Board of Governors focused on community banks. Without them, the board runs the risk of getting too involved in big-bank interest areas, like commodities.
In order to persuade President Obama to consider someone with community banking experience, senators from across the country are doing everything from writing Obama letters to even moving to pass legislature guaranteeing at least one of the seven Board of Governors has community banking experience.
To learn more about some of the economic conditions that could impact community bankers this year, download the whitepaper: Lending Outlook for 2014.