By Matt Grossman
Federal Reserve governor Christopher Waller is advocating for a new approach to how the Fed system handles support functions such as human resources, IT and risk management, arguing that centralizing them would promote efficiency and better management.
In many cases, these operational functions are now handled separately at each of the Federal Reserve's 12 regional bank reserve banks, which largely run independently from each other and answer to their own boards of directors. Waller said Friday afternoon at a monetary-policy conference at Stanford University's Hoover Institution.
Under the new plan, "the System, and ultimately the taxpayer, benefits from lower operating costs and better overall risk management, with services delivered consistently across the Reserve Banks," Waller said, according to a published text of his remarks.
Waller said that the details of the new approach still need to be worked out. Under the plan, each individual support function--human resources, for example--would be handled by a single reserve bank, which would act like a contractor for the other reserve banks, Waller said. The other reserve banks, in exchange, would give up some day-to-day decision rights about how those functions are handled.
"The foundation is now in place for driving an important transformation," Waller said.
The Fed's operational efficiency has become a more prominent focus for the sprawling central bank. Many of the Fed's subsidiary institutions, which include the Washington, D.C.-based board of governors and the 12 reserve banks that dot the country from Boston to San Francisco, each employ thousands of staffers.
Last year, the Fed laid out plans to reduce system-wide staff by 10% in the years ahead. The Fed's bank-supervision staff has been earmarked for 30% staff cuts, The Wall Street Journal has reported.
Kevin Warsh, likely to be confirmed as the Fed's next chair in a Senate vote next week, has advocated for a smaller Fed footprint across several dimensions, arguing that the central bank should have a smaller presence in financial markets and should stay out of political matters such as climate policy.
In his speech Friday, Waller argued that centralizing the Fed's support functions won't impinge on the monetary-policy independence that the reserve-bank system seeks to foster.
"The decentralized and regional design of the Federal Reserve helps reinforce our independence by ensuring that the full range of interests and views are represented in policy discussions, and that is something that should be preserved," Waller said.
Write to Matt Grossman at matt.grossman@wsj.com
(END) Dow Jones Newswires
05-09-26 1800ET
