By Neil Irwin
Washington Post Staff Writer
Tuesday, August 25, 2009
Denis M. Hughes, a New York labor leader, was named Monday to chair the Federal Reserve Bank of New York's board of directors.
Instead of a résumé filled with corporate or financial experience, as has been typical of his predecessors, Hughes is president of the New York State AFL-CIO. He succeeds Stephen Friedman, who resigned from the job in May after drawing criticism for his simultaneous service as a director of Goldman Sachs and for buying stock in the company even after it became regulated by the New York Fed.
The board of directors of the regional Federal Reserve banks serves mainly an advisory role, sharing with bank presidents its views of economic conditions and business trends. The directors have no role in setting monetary policy or determining how banks are regulated, though they select the president of the bank, who does have those powers, subject to approval by the Fed board of governors in Washington.
In the past, the chairman of the New York Fed was usually chosen from the corporate or financial elite. Friedman was a former Goldman Sachs chief executive. Before him, Jerry I. Speyer was one of New York's leading developers of commercial real estate as head of Tishman-Speyer. Another recent chairman was Peter G. Peterson, the billionaire founder of private equity firm the Blackstone Group. A recent exception to the rule: John E. Sexton, who served between Speyer and Peterson, is president of New York University.
Hughes, as leader of a labor union that represents 2.5 million workers, is an even greater departure from that tradition. But he is no newcomer. Hughes has been on the New York Fed board since 2004 and deputy chairman since 2007. He was named acting chairman of the board in May when Friedman stepped down.
Completing the move away from having people from the financial world lead the New York Fed board of directors, Lee C. Bollinger, the president of Columbia University, was named deputy chairman on Monday.
The unusual mix of public and private governance of the regional Fed banks was put in place by the Federal Reserve Act in 1913, and some in Congress are looking to revisit how the regional banks are structured as they consider broader reforms to the financial world. Board members such as Hughes and Bollinger are "Class C" directors, chosen by the presidentially appointed Fed board of governors in Washington, and to represent business, industry, agricultural, labor or consumer interests.
The boards also include "Class A" directors, who lead private banks, and "Class B" directors, who are business leaders chosen by bankers.