Bessent plans to push residency requirement for regional Fed bank presidents

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Dec 3 (Reuters) – U.S. Treasury Secretary Scott Bessent on Wednesday said he plans to advocate for a requirement that the 12 regional Federal Reserve Bank presidents reside in their districts for at least three years before being appointed to those positions.

Bessent, speaking at the New York Times DealBook Summit, said going forward he would press that appointments of candidates who have not satisfied that threshold be vetoed by the Fed’s Board of Governors in Washington.

“The chair and the board have the final say on who … the regional bank boards can select,” Bessent said. “So I believe that … unless someone’s lived in the district for three years, we’re going to veto them.”

Bessent, who is in the process of selecting a candidate to recommend to President Donald Trump as the successor for Fed Chair Jerome Powell, said the fact that some of the current regional bank presidents were hired from outside their districts is at odds with the spirit of how the U.S. central bank’s system was designed.

The leaders of that system include seven Fed board members based in Washington and appointed by the president and 12 heads of regional reserve banks hired by their own local boards of directors. The system, set out in the Federal Reserve Act, was designed to ensure that U.S. central bank policy reflected input from officials from around the country, not just political appointees based in Washington.

“I do believe that there is now a disconnect from the original framing,” he said.

Bessent, who like Trump wants interest rates set by the Fed to be lower, has repeatedly complained that several regional bank presidents are not from the districts they were hired to represent. Several of those – including Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack and St. Louis Fed President Alberto Musalem – are also among the policymakers most vocally opposed right now to further Fed rate cuts.

“Now there’s this idea of importing a bright, shiny object,” Bessent said, referring to some of the current bank presidents who have worked previously at the New York Fed. “So do they represent their district? So I am going to start advocating, going forward, not retroactively, that regional Fed presidents must have lived in their district for at least three years.”

(Reporting by Dan Burns; editing by Paul Simao)