Valley National Bank Leader Nominated To NY Fed Bank Board

   By Michael S. Derby 
 

NEW YORK--The New York Fed is on the verge of closing a controversial chapter for the board that oversees the institution.

On Tuesday, the New York Fed said that its Board of Directors has nominated Gerald Lipkin, president and chief executive officer of New Jersey's Valley National Bank, to fill a slot on its board reserved for representatives from smaller banks. Mr. Lipkin has been nominated to take over a position vacated by Richard Carrion, of Banco Popular de Puerto Rico.

Mr. Carrion was elected earlier in the year to fill a directorship reserved for large banks in the New York Fed's district. That position opened at the end of last year after Jamie Dimon, leader of JPMorgan Chase & Co., completed his term. Mr. Lipkin's bank did not respond to a request for comment.

Mr. Carrion's elevation represented the beginning of the end of a difficult period for the New York Fed. If Mr. Lipkin gets the support of New York Fed member banks, the institution will no longer count leaders of too-big-to-fail banks among its board membership.

Over recent years, the presence mega-bank leaders on the New York Fed board has proved highly controversial. Critics have contended there's a huge conflict of interest for the board to have bankers watching over the New York Fed, at the same time the institution regulates those same financial firms. The events of the financial crisis and the central bank's extensive bailouts and interventions only heightened this anxiety.

During Mr. Dimon's contentious tenure coincided with his bank facing a major trading loss that alarmed many observers. While Mr. Dimon competed his appointed term, he was the subject of a fairly substantial campaign from Fed critics to have him removed early.

Other black eyes to the New York Fed board included Stephen Friedman, a Goldman Sachs director and shareholder, who resigned in 2009 as board chairman amid questions about his financial holdings. Lehman Brothers leader Richard Fuld was a director in 2008 when his bank imploded, an event that accelerated the financial crisis to a fever pitch.

Fed officials assert the controversy over who serves on the board is misguided. Each of the 12 regional bank boards is comprised of a mix of bankers, local business leaders and community interests, based on law set by Congress. Fed officials say board members provide valuable information on local economies, as well as important advice on operational issues.

Critically, central bankers say board members are not privy to any information about monetary policy issues. Legal changes have removed bankers from perhaps the board's most important role, choosing a new bank president. Meanwhile, bank supervision is managed by the Federal Reserve in Washington, and not by the regional Fed banks that actually house the regulators.

-Write to Michael S. Derby at [e-mail]