Serving the Bank and the Public

Serving the Bank and the Public

This article originally appeared in the Bank's employee newsletter
First Quarter 2012

They aren’t employees of the Federal Reserve Bank of Minneapolis, yet these individuals contribute significantly to the Bank’s mission by serving as a source of intelligence and insight into economic conditions in their regions and sectors, providing a link to the communities we serve and providing oversight to the management of the Bank. Who are they? Our board of directors.

Roles and Responsibilities

The Bank’s board of directors derives its authority from the Federal Reserve Act, which says that the Reserve Bank “shall be conducted under the supervision and control of a board of directors” and that directors “shall perform duties usually appertaining to the office of directors of banking associations and all such duties as are prescribed by law.”

Our board of directors consists of nine people from across the Ninth Federal Reserve District, and they draw from their vast leadership, business, and community experiences to contribute to the work of the Bank and the Federal Reserve System. They have a diverse set of backgrounds and perspectives, from business, banking, and consumer/community development fields.

The Bank’s board of directors meets on site nine times a year for its regular meetings; in addition to attending these meetings, Bank directors spend a significant amount of time on their own and conferring with industry and regional contacts to provide the Bank insight on current and emerging issues that cannot be found in the data and comes only from direct involvement with their local communities, businesses, and organizations. Directors are reimbursed for travel expenses associated with meetings and receive only a modest stipend for their services.

Three Classifications

The nine Board members serve staggered three-year terms. The directors are divided equally among three classifications:

Class A directors are elected by member banks and are typically officers or directors of banks and/or their holding companies. Class B directors are elected by member banks, and Class C directors are selected by the Board of Governors (following nomination by the Bank’s nominating and governance committee)—both Class B and C directors are representative of the public.

Class B and C directors are eligible to serve two terms; Class A directors serve only one term, by action of the Minneapolis board of directors. Our vice chair and chair serve in these roles for two years—current chair, Mary Brainerd, began a two-year stint as chair in 2012. “I value my four years on the Minneapolis Fed board a great deal,” Ms. Brainerd commented. “It’s been a challenging and fascinating time—the financial crisis, the Dodd-Frank Act, and in the midst of all this, the selection of Narayana as Bank president and chief executive officer in 2009. It’s been an honor to serve the Fed, and I’m looking forward to two years as chair of the board of directors.”

Committees and Other Responsibilities

In addition to attending Board meetings, members serve on one or more of the following committees: the executive committee, the audit committee, the nominating and governance committee, and the budget, evaluation, and risk committee. Through committees and board deliberations, the Board reviews and approves the Bank’s annual budget, reviews Bank performance, and oversees the internal audit program and control environment.

Narayana Kocherlakota, President, (front right)
and James Lyon, First Vice President (second
from the right) of the Federal Reserve Bank
of Minneapolis

Importantly, directors’ responsibilities include establishing the Bank’s discount rate (subject to review and determination by the Board of Governors), which is the interest rate charged to depository institutions on loans they receive from the Federal Reserve. The board also selects the Bank’s president and first vice president (with final approval from the Board of Governors) and approves the appointment and promotion of all other Bank officers.

There is no question that the directors’ viewpoints are highly valued within the Bank. Their observations about the state of the district’s economy and credit conditions based on their experience are provided to Bank management and, ultimately, to the Board of Governors and the Federal Open Market Committee (FOMC). “The diverse viewpoints shared by our directors are very valuable,” President Kocherlakota stated. “Hearing from these leaders about what’s happening in their local economies, communities, and industries helps shape my comments to the FOMC.”

The Helena Branch Board of Directors

The Helena Branch has five directors. Three of them are appointed by the Minneapolis board and two are appointed by the Board of Governors. The Branch directors' operational roles and responsibilities are advisory in nature, and they meet with Branch management several times per year in Helena, the week prior to the Minneapolis board of directors meetings.

Like the Minneapolis directors, Branch directors serve as a link between the Federal Reserve and the private sector and provide leaders with information on economic developments in their region. In addition to providing reports and reviewing economic conditions at the Helena board meetings, each of the Helena directors rotates attendance at the Minneapolis board meetings to contribute in person to discussions about economic conditions in the district.