Tightfisted Fed Generous to Own Staff, Panel Reports

The Federal Reserve, renowned for its tightfisted control of the nation’s money supply, is considerably more generous to its own staff: It has more than doubled the number of executives who earn more than $125,000 in just the last three years, a congressional study shows.

The Fed’s director of support services, for example, whose job is to oversee janitors and guards, earns more than the secretary of defense, according to a study by the House Banking Committee released Wednesday.

The Federal Reserve has 72 staff members who earn more than $125,000, up from just 35 in 1993, investigators for the House Banking Committee found.

“I want to know why the Federal Reserve is building a bigger kingdom while the rest of the government is on the rack,” Rep. Henry B. Gonzalez (D-Texas), a longtime Fed critic, said in a letter to Federal Reserve Board Chairman Alan Greenspan.

A Federal Reserve spokesman declined comment on the Gonzalez letter or on the findings of the study. The letter arrived Wednesday and the agency has not had time to look into the issue, the spokesman said.

By comparison, the salaries paid by private sector banks are much higher than those of the Federal Reserve, which is a semiautonomous arm of the government. A survey of the banking industry in 1995 found that multimillion-dollar compensation packages are not unusual.

Nonetheless, the disclosures are the latest in a string of public relations setbacks for the central bank. Earlier this week, an audit disclosed sloppy cash management at the Los Angeles bank and four secretaries accused the Federal Reserve of discrimination in a lawsuit.

The Federal Reserve has also come under increasing criticism for its overall growth in costs.

A report by the General Accounting Office, the investigative arm of Congress, issued in June showed that the Fed’s cost grew 48% between 1988 and 1994--about double the rate of inflation. That was in contrast to the commercial banking sector, which was downsizing its organizations, the GAO report noted.

The Banking Committee study, done by the committee’s Democratic staff, examined only the salaries of Federal Reserve staff members and not the senior executives of Federal Reserve Banks or the Board of Governors, whose salaries have always been public.

Greenspan makes $133,600, and other members of the Board of Governors each make $123,100--salaries that are set by law along with those of other federal agency chiefs.

William Parry, chairman of the San Francisco Federal Reserve Bank, is the highest-paid Federal Reserve banker, however, earning $253,000 annually--more than the $200,000 earned by President Clinton.

A spokeswoman for the San Francisco federal bank said Parry’s high salary is based in large part on the fact that he has headed a regional bank longer than any other Fed bank president.

The Banking Committee study shows that the top dozen Federal Reserve staff members in Washington earn a salary of $174,000, far more than Vice President Al Gore, House Speaker Newt Gingrich or the nine Supreme Court justices.

The individuals were not identified by name but rather by job title. The jobs include staff director for management, director for research and statistics, director for monetary affairs and legal director, among others.

A committee investigator said the official identified as being director of support services is actually head of custodial services, earning $163,800. By contrast, the secretary of defense and other cabinet secretaries earn $148,400.

Although the salaries of Federal Reserve staff members are high by government standards, they pale in comparison to those of private bank executives.

A survey done last year for American Banker, a trade publication, found that the 100 highest paid bankers in the nation received salary increases of 24% and even the lowest paid executives earn $150,000. The top performer in the survey was retired Bank of America chief Richard M. Rosenberg, who pulled in a package of $12 million.

Conversely, many federal government officials who wield enormous power often earn relatively paltry salaries and always have. Chief Justice William H. Rehnquist, for example, earns $171,500--far less than thousands of attorneys across the country.

Gonzalez’s letter also takes Greenspan to task for the Fed’s record in hiring minorities and women. The bank has increased its representation of women in recent years, it remains behind the rest of the federal government in hiring of both women and minorities.

“There is still evidence of substantial gender and racial bias in Fed hiring and promotion,” Gonzalez wrote.