United States Treasury Secretary Scott Bessent has said he would push a new requirement that the Federal Reserve’s regional bank presidents live in their districts for at least three years before taking office, a move that could give the White House more power over the independent agency.

In comments at the New York Times’s DealBook Summit on Wednesday, Bessent said that “there is a disconnect with the framing of the Federal Reserve” and added that, “unless someone has lived in their district for three years, we’re going to veto them”.

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Bessent has stepped up his criticism of the Fed’s 12 regional bank presidents in recent weeks after several of them made clear in a series of speeches that they opposed cutting the Fed’s key rate at its next meeting in December. US President Donald Trump has sharply criticised the Fed for not lowering its short-term interest rate more quickly. When the Fed reduces its rate, it can over time lower borrowing costs for mortgages, auto loans, and credit cards.

The prospect of the administration “vetoing” regional bank presidents would represent another effort by the administration to exert more control over the Fed, an institution that has traditionally been independent from day-to-day politics.

The Federal Reserve seeks to keep prices in check and support hiring by setting a short-term interest rate that influences borrowing costs across the economy.

Complicated structure

The Fed has a complicated structure that includes a seven-member board of governors based in Washington as well as 12 regional banks that cover specific districts across the US. The system, set out in the Federal Reserve Act, was designed to ensure that US central bank policy reflected input from officials from around the country, not just political appointees based in Washington.

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The Federal Reserve Act does not impose any residency requirements on regional bank presidents. Regional Fed banks have repeatedly argued that in selecting new leaders, merit and ability have driven their decision-making.

The seven governors and the president of the New York Fed vote on every interest-rate decision, while four of the remaining 11 presidents vote on a rotating basis. But all the presidents participate in meetings of the Fed’s interest-rate setting committee.

Bessent, who is in the process of selecting a candidate to recommend to Trump as the successor for Fed Chair Jerome Powell, said the fact that many of the current regional bank presidents were hired from outside their districts is at odds with the spirit of how the US central bank’s system was designed.

Bessent argued last month in an interview on CNBC that the reason for the regional Fed banks was to bring the perspective of their districts to the Fed’s interest rate decisions and “break the New York hold” on the setting of interest rates.

But now, he said last month, “three, maybe four” of the Fed presidents were appointed from outside their districts, with some living in New York.

“I’m not sure that’s the way the Federal Reserve was designed,” Bessent said in the interview.