The Federal Reserve’s in-house watchdog, the Inspector General (IG), has launched an inquiry into the process by which the U.S. central bank’s Board of Governors reappoints regional Fed presidents and their deputies. Announced on Wednesday, the IG’s assessment will determine if the Washington-based board’s reappointment process aligns with relevant Federal Reserve Administrative Manual requirements and leading practices. The Federal Reserve serves as the central bank of the United States, tasked with managing the nation’s monetary policy, supervising banks, and maintaining financial stability. Its regional bank presidents play a key role in setting monetary policy and gathering economic intelligence.
The inquiry will also scrutinise the quality and completeness of executive performance evaluations and other pertinent information necessary to assess the merits of reappointments. Interest in the reappointment mechanism has grown following former U.S. President Donald Trump’s aggressive pressure campaign against the Fed. Some observers expressed concerns that the process could be exploited to remove regional policymakers who did not support his calls for interest rate cuts. The selection process for these five-year terms has previously faced criticism for its lack of transparency and limited public engagement.
Regional Fed banks are quasi-private institutions overseen by local boards, which select new presidents subject to central bank approval. These officials almost always retain their positions upon reappointment. The most recent reappointment cycle, concluded late last year, saw the Fed’s board unanimously approve 11 officials. The IG’s current project is part of a broader suite of reviews, including a significant past probe into cost overruns during the renovation of the Fed’s Washington headquarters, an investigation that previously sparked friction between the central bank and the Trump administration.
