Public Service or Private Benefits? Bankers in the Governance of the Federal Reserve System
58 Pages Posted: 25 Aug 2016 Last revised: 9 Feb 2018
Date Written: February 8, 2018
Federal Reserve Banks are private corporations with boards of directors and one-third of the seats on each board are held by bankers. We investigate whether these directorships create value for banks elected between 1986 and 2013 and through what channels. The announcement of a banker’s appointment to the board of directors of a Federal Reserve Bank produces a roughly 1% cumulative abnormal return in the bank’s stock price. We find evidence consistent with value being created through certification or implicit guarantees, and access to private information about monetary policy.
Keywords: banks, political connections, financial regulation, central banks, corporate governance
JEL Classification: G28, G21, G30, E58
Suggested Citation: Suggested Citation