Bankers on Fed Boards: Is Good News for the Banks Bad News for the Fed?
48 Pages Posted: 30 Nov 2013
Date Written: November 25, 2013
Bankers and non-bankers sit on Federal Reserve Bank Boards. In the case of banks, this may create a perception problem since the Fed supervises banks. I examine who sits on Reserve Bank boards and the market reaction to director appointments during the period 1990-2009. I document that Fed directors from the banking industry typically work for large banks. Furthermore, the average market reaction to the appointment of a firm’s officer to a Reserve Bank board is positive only for banks. My results are consistent with the idea that the Fed’s governance structure may continue to expose it to reputation risk.
Keywords: Federal Reserve, Director, Banks, Conflicts of Interest, Reputation, Perception
JEL Classification: E58, G28, G30
Suggested Citation: Suggested Citation