Bigger Isn’t Better: A Case for Downsizing the Federal Reserve
Does the Fed need 24,000 employees? A leaner, more automated institution could reduce costs and improve transparency…
Paul Mueller | The Daily Economy
President Trump’s conflicts with Chairman Powell and with Governor Cook have obscured real shortcomings at the Federal Reserve and brought little useful change. These conflicts tend to focus on whether the Fed’s target interest rate is too high or too low. Meanwhile, institutional problems at the Fed have been largely overlooked.
But there is an opportunity here with Trump’s nominee for Fed chair, Kevin Warsh. His first task will be navigating a hostile Senate. But should he be confirmed, Warsh’s time would be best spent cleaning up the Federal Reserve system: its personnel, spending, and data.
The Federal Reserve System employs 24,000 people. The Board of Governors has about 3,000 employees, while the 12 district banks employ the remaining 21,000. That figure includes 800–1,000 professional economists. While the Fed has recently announced plans to reduce its workforce by 10 percent, that would still leave it with over 21,000 employees. But why shouldn’t the Fed cut headcount by 20–30 percent, or even more?
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