US Treasury Secretary Scott Bessent has declared he will advocate for a significant new rule for the Federal Reserve's regional chiefs, a move analysts say could grant the White House greater sway over the politically independent institution.
Proposed 'Veto' and Residency Requirement
Speaking at the New York Times DealBook Summit on Wednesday 03 December 2025, Bessent stated he would push for a requirement that the presidents of the Fed's 12 regional banks must have lived in their respective districts for a minimum of three years before taking office. He framed this as addressing a "disconnect" in the Fed's structure.
In stark terms, Bessent asserted, "unless someone has lived in their district for three years, we're going to veto them." This suggestion of a potential White House veto over appointments marks a notable escalation in the administration's approach to the central bank.
Escalating Tensions Over Monetary Policy
The Treasury Secretary's comments follow weeks of heightened criticism directed at the regional Fed presidents. This friction stems from public speeches by several bank presidents indicating their opposition to cutting the Fed's key interest rate at its upcoming December meeting.
President Donald Trump has repeatedly criticised the Federal Reserve for not moving more swiftly to lower short-term interest rates. When the Fed reduces its benchmark rate, it can eventually lead to lower borrowing costs for consumers on products like mortgages, car loans, and credit cards.
Potential Impact on Fed Independence
The prospect of the administration intervening to veto regional bank presidents represents a fresh effort to exert more control over the Federal Reserve. The central bank is designed to operate independently from day-to-day political pressures to effectively manage its dual mandate of controlling inflation and maximising employment.
The Fed has a unique structure, comprising a seven-member Board of Governors in Washington and 12 regional banks across the United States. While all regional presidents participate in policy meetings, only the New York Fed president and the Governors have a permanent vote on rate decisions, with four other regional presidents voting on a rotating basis.
Last month, Bessent argued in a CNBC interview that the regional banks were meant to bring diverse local economic perspectives to Washington and "break the New York hold" on interest rate setting. He claimed that currently, "three, maybe four" of the Fed presidents were appointed from outside their districts, with some residing in New York. "I’m not sure that’s the way the Federal Reserve was designed," he concluded.
