WASHINGTON: Even Democrats are Fed Up with the US central bank. The advocacy group of that name, which represents progressive organisations, says the Federal Reserve is beholden to Wall Street. In a report on Monday, the coalition calls for more accountability and an end to the dividends private-sector banks receive on capital they keep at the central bank. The latest attack builds on pressure already heaped on Fed Chair Janet Yellen and her colleagues by conservatives.

Fed Up says a reformed central-banking system is needed for a more balanced economic recovery. In a report issued in advance of the annual Jackson Hole central-banking confab hosted by the Kansas City Fed, the group points out that many of the directors at the 12 regional reserve banks are connected to Wall Street. The group also argues that the payouts to banks — some $2 billion in 2015 — are symbolic of their perceived ownership of the Fed.

The Fed is also facing calls for greater transparency from Republicans. Senator Rand Paul has proposed legislation to audit the institution. In the House of Representatives, Financial Services Committee Chair Jeb Hensarling will introduce a bill next month that would rein in the central bank’s powers. Lawmakers have already cut the dividends paid to banks and the Fed’s related rainy-day capital surplus to pay for a $305bn highway bill.

Democrats have largely defended the Fed so far. In January, the party’s opposition to Paul’s bill led to its defeat in the Senate. In the House, senior Democrat Maxine Waters has backed the Fed in the face of Hensarling’s criticisms.

The report from Fed Up underlines the problem facing the Fed because of its close relationships with the banks it regulates. Last November, a former employee of the New York Fed pleaded guilty to leaking information to a past colleague who went on to work for Goldman Sachs. Senator Elizabeth Warren has questioned why so many Fed officials have ties to Citigroup and other Wall Street firms.

Senator Bernie Sanders’ tough bid for the presidential nomination against Hillary Clinton has already pushed the Democrats to the left. The groups in the Fed Up coalition, including think tanks and unions, are important party constituencies. Yellen and the Fed are in danger of losing friends on both sides of the aisle.

Published in Dawn, August 23rd, 2016