New York AFL-CIO President Named Head of NY Federal Reserve
Upon learning that Denis Hughes, AFL-CIO NY State president would be named head of the Federal Reserve Bank of New York, AWF urges Mr. Hughes to explain how he will resolve the clear conflict of interest...or resign. The letter sent to Mr. Hughes and other leading officials, and the accompanying press release can be found below.
[click here for PDF of this letter] [click here a PDF of the press release]
Denis M. Hughes
Chairman
Federal Reserve Bank of New York
33 Liberty Street
New York, NY 10045
Dear Chairman Hughes:
On behalf of the Alliance for Worker Freedom (AWF), an organization founded in 2003 to combat anti-worker legislation and promote free and open markets, and millions of rank-and-file American workers, I am calling on your to formally resign as recently appointed Chairman of the Federal Reserve Bank of New York due to direct conflicts of interest.
As you know, union pension funds are highly dependent on Federal Reserve interest rate-setting policies. While the Fed only sets the short-term rates, such rate changes will steer long-term rates in the same direction. When long-term rates go up, less new money needs to be deposited into union pension funds (since the existing money is assumed to compound faster). When long-term rates go down, more money needs to be deposited into the funds (since the existing money is assumed to grow more slowly). Unions, which manage these pension funds, always want to have more new money to play with. Thus, unions might tend to be in favor of lower-than-optimal interest rates.
From your current position as President of the New York state AFL-CIO, you are well aware of this process and you have a conflict of interest with that of your union and what is in the best interest for the economy.
The conflict of interest here is clear. A Federal Reserve governor has a mandate to set rates based on price stability and full employment. This person does not (or should not) have any potential extraneous motivations, such as the health of their associates’ pension plans.
As a former union member since age 16, you have an incentive to favor the unions over the health of the economy.
If you refuse to step down, please provide a detailed answer as to how as a lifetime union member, you will be able to divorce yourself from your loyalty to organized labor and base your policy on sound economics?
I look forward to your response.
Sincerely,
Brian M. Johnson, MPA
Executive Director
cc: President Barack Obama
Secretary of the Treasury Timothy Geithner
Chairman of the US Federal Reserve Ben Bernanke
Chairman of the Senate Committee on Banking Chris Dodd (D-CT)
Ranking Member of Senate Committee on Banking Rick Shelby (R-AL)
Chairman of House Financial Services Barney Frank (D-MA)
Ranking Member of House Financial Services Spencer Bachus (R-AL)
Senator Charles Schumer (D-NY)
Senator Kristen Gillibrand (D-NY)
All House of Representative Members from New York
All State Legislators of New York State
AWF sent the below press release out to accompany the above letter:
FOR IMMEDIATE RELEASE CONTACT: 202-785-0266
26 AUGUST 2009
media@workerfreedom.org
Worker Group Calls on Chairman of NY Federal Reserve to Resign
Denis Hughes, head of NY AFL-CIO has clear conflict of interest
WASHINGTON, D.C. — Today, the Alliance for Worker Freedom (AWF), an organization founded in 2003 to combat anti-worker legislation and promote free and open markets, called on Denis M. Hughes to resign as recently appointed Chairman of the Federal Reserve Bank of New York due to direct conflicts of interest.
In their letter to Chairman Hughes, AWF Executive Director Brian M Johnson writes:
The conflict of interest here is clear. A Federal Reserve governor has a mandate to set rates based on price stability and full employment. This person does not (or should not) have any potential extraneous motivations, such as the health of their associates’ pension plans.
The Alliance for Worker Freedom has done extensive work on the failing status of union managed multi-employer pension plans noting that the average union pension only has enough assets to cover 62 percent of what is owed to participants. Further, the group says that only one in every 160 is covered by a union pension with the required assets.
Johnson says it is irresponsible for Chairman Hughes to accept this position. “union funds are dependent on [Federal] Reserve setting policies. When long-term rates go up, union funds compound faster and less money needs to be put in. This frees up capital for political activism and other union shenanigans.”
The letter concluded with AWF asking Chairman Hughes to provide a detailed answer as to his “plans to divorce [himself] from [his] loyalty to organized labor and base [his] policy on sound economics.” The letter can be found on www.workerfreedom.org.
National Press & Talk Radio Alert:
To schedule an interview with Brian Johnson, call 202-785-0266 or
email media@workerfreedom.org
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