Sanders wants to ban bankers from sitting on Federal Reserve boards.
Sanders seems to be a bit confused about how the Fed works. There are regional Fed boards around the country, which often have grand local bankers on them, whose job is to keep an eye on the economy. And then theres the board of governors of the Federal Reserve system, which sets interest rates, and is the powerful monetary authority of the nation, and which doesnt have bankers. Taking bankers off the regional Fed boards would be merely symbolic, with the possible exception of the New York Fed.
Sanders wants to end the practice of paying interest on excess reserves held at the Fed.
This is a highly complex debate, but the short version is: yes, this sounds like a good idea, but the interest rate that the Fed pays on excess reserves is a very important monetary-policy tool. If it cant pay interest on those reserves, it could be very, very difficult for the Fed to raise interest rates when it needs to.
Its pretty clear that Sanders isnt a policy wonk when it comes to interest on excess reserves. Instead of paying banks interest on these reserves, he says, the Fed should charge them a fee that could be used to provide affordable loans to small businesses to create hundreds of thousands of jobs. This just doesnt make any sense. If the banks are paying a fee to the Fed, where do the small-business loans come from? Does Sanders want the Fed to lend money directly to small businesses? That would be a very bad idea.
