Yes. That's a valid concern in my opinion. Keep in mind, however, that whereas the Branch banks are essentially run by officers rotating from their respective, regional member banks; hence conflicts of interest can arise, the Board of Governors is over the whole works and government through and through. What the BOG says, goes for the whole system. The BOG is essentially an independent branch of Treasury. If the BOG does its job, then there should not be much of a problem from conflicts of interest. The most glaring example of the BOG not doing their job was under Greenspan. A lesson seems to have been learned, and one would not expect a repeat until the fog of time obscures our recent history, which it eventually will.
The U.S. Fed System is the model that much of the rest of the World looks up to. The Board of Governors has been headed by academic economists since Greenspan. (Greenspan went the wall street-business-political route to his position as Fed Chair, and has a somewhat undistinguished academic background by comparison. He was, nevertheless, a summa cum laude undergraduate student at NYU, i.e., he's on the right-hand tail of the bell curve! He dropped out of Columbia grad school. Studied the clarinet for a year at Julliard. Played in Woody Herman's band with President Nixon's future counsel, Leonard Garment. Worked on Wall Street, etc. (I like to joke with my buddies that it was while working as a Wall Street Analyst that Greenspan perfected the art of mumbo jumbo.) Thirty years later (1977!), apparently when he sensed that a Ph.D. would legitimize his position as head of Nixon's CEA, he got a Ph.D. in economics from NYU. This remains a highly suspect accomplishment for two reasons: 1. It is nearly impossible to get a Ph.D. in economics while doing anything else on the side unless "special" accomodations are made (if you know what I mean), and 2. He later, when he became Fed Chair, asked that his dissertation be removed from the NYU library! (Why would he do that? You'll only need one guess on this one.) His route to Fed Chair was quite different than Bernanke's or Yellen's: he was Richard Nixon's coordinator on domestic policy in the 1968 campaign. Nixon put him on his CEA. Ford kept him on. Carter promptly removed him from the CEA Chairmanship, one of Carter's brighter moments. Reagan eventually appointed him Fed Chair. A move that one can argue was among Reagan's greatest blunders because the Fed is the regulator of U.S. banks, and Greenspan, as an Ann Rynd Objectivist, did not believe in regulation!!! He was still expressing his view that banks and the financial industry should be "self-regulating" after the horrible excesses in the mortgage industry were made known to him. As the regulator in Chief, he did nothing in the way of regulating! It is better not to appoint an ideolog to head government agencies, I would conclude.. To his credit, if I remember correctly, he did admit in his book that he made the mistake of believing that bankers would not act against their own self-interest -- or words to that effect. It was, apparently, as much of a apology as we are going to get.
Both Yellen and Bernanke accomplished academic economists that were appointed to the board because of their achievements, and of course, because they were there at the right time to be promoted to Chairman. Yellen is a summa cum laude brown graduate, then Yale. Here, from her Wiki Bio is a little blurb about her background. (Note that she had worked as an economist at the Fed previously, which is excellent background for her present job.)
"Yellen -- Yellen was an assistant professor at Harvard in 1971–76 and a lecturer at The London School of Economics and Political Science in 1978-1980. She was an economist with the Federal Reserve Board of Governors in 1977–78.[10] Beginning in 1980, Yellen has been conducting research at the Haas School and teaching macroeconomics to full-time and part-time MBA and undergraduate students. She is now a Professor Emerita at the University of California, Berkeley's Haas School of Business, where she was named Eugene E. and Catherine M. Trefethen Professor of Business and Professor of Economics. Twice she has been awarded the Haas School's outstanding teaching award."
Yellen has a son who is an academic economist at England's Warwick University, and a Nobel Memorial Prize, economist husband.
Bernanke was valedictorian of his high school class, taught himself calculus because his high school didn't offer it. Bernanke scored 1590 out of a possible 1600 on the SAT! He is summa cum laude Harvard, Ph.D. from MIT.
"Again from Wiki, on Bernanke : "
...after completing and defending his dissertation, Long-Term Commitments, Dynamic Optimization, and the Business Cycle. Bernanke's thesis adviser was the future governor of the Bank of Israel, Stanley Fischer, and his readers included Irwin S. Bernstein, Rüdiger Dornbusch, Robert Solow, and Peter Diamond of MIT and Dale Jorgenson of Harvard.
As you no doubt know, Bernanke was chair of the Princeton Economics Department before he took the Job as Fed Chair. Earlier in his career he was on the faculty of the Stanford Graduate Business School.
You would find the resumes of the other Governors similarly impressive. Many of the members of the Branch Bank boards will have impressive resumes as well, but with more banking/business and less academic focus. Hopefully, they all believe in regulation!
