Jim McKelvey is founder and CEO of Invisibly Inc. and co-founder of Square.
Patterns are funny things. You can see them your entire life without ever noticing them. But once you finally notice, they appear everywhere. There’s a pattern involving the Federal Reserve that I hadn’t noticed until joining the St. Louis Fed’s board of directors: scrutiny of the institution. It turns out this criticism is as old as the Fed itself, which turns 110 this year.
This pattern of scrutiny is not one that Fed leaders fear. An institution created to promote a healthy economy must remain accountable—to Congress, to constituents and to all American citizens. Responding to critics can be a gift for the Fed because it provides an opportunity to further explain our organization. An organization that can be difficult to understand.
A common criticism concerns the 12 regional Federal Reserve banks spread throughout the country. Couldn’t we suffice with fewer? Or, even just one office in New York or Washington, D.C.? Answering this question is fun because it allows me to discuss the Fed’s regional structure, something that the founders had the vision to know was essential to the Fed’s enduring success.
A dozen banks along with their branches throughout the country ensure that the interests of the entire nation are considered. Here in the Eighth District, Bank President Jim Bullard stays apprised of local economic conditions in several ways, including reports from the directors in St. Louis, Little Rock, Louisville and Memphis. For years, the St. Louis Fed has also relied upon insights from industry councils, composed of business leaders from throughout the District representing agribusiness, health care, real estate and transportation. These sorts of ground-level views of the economy are occurring throughout the other 11 Fed districts, ensuring that economic conditions on Main Street are considered when Fed presidents gather for Federal Open Market Committee meetings. The votes occur in Washington, but the data come from us all.
Another benefit of the regional structure is the distribution of brainpower across the country through the scholarly research of each Reserve bank. The St. Louis Fed’s economists have been at the forefront of critical research for decades. Several of their perspectives are featured in this year’s annual report, which focuses on globalization and trade—timely topics they explore from multiple angles.
It’s common for the economists at the St. Louis Fed—and those at every Reserve bank—to examine a variety of issues, from global trade to inflation to economic equity, and offer unbiased and data-driven analysis. Such research is further evidence of the importance of the Federal Reserve’s regional structure and why this construct continues to serve the United States well—from the nation as a whole to the Main Streets where we all live.
Chair of the Board of Directors
Federal Reserve Bank of St. Louis