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This is a segment from The Breakdown newsletter. To read full editions,\u00a0<\/em>subscribe<\/em><\/a>.<\/em><\/p>\n \u201cMoney and banking, in the end, is a confidence game, and our job at the Federal Reserve is to preserve confidence.\u201d<\/p>\n \u2014 Richard Fisher, President, Federal Reserve Bank of Dallas (2005-2015)<\/p>\n<\/blockquote>\n<\/figure>\n In Michael Lewis\u2019 Wall Street classic Liar\u2019s Poker<\/em>, the phrase \u201cequities in Dallas\u201d is wielded as an epithet \u2014 a catch-all term for the least competent people at Salomon Brothers doing the firm\u2019s least desirable jobs.<\/p>\n The young investment bankers in Lewis\u2019 class of Salomon trainees lived in fear of being assigned to the equities division in Dallas \u2014 a fate considered only marginally better than being fired.<\/p>\n In their eyes, Dallas, TX \u2014 an incomprehensible 1,547 miles removed from Salomon\u2019s New York City headquarters \u2014 was a financial backwater of provincial irrelevance.<\/p>\n But Dallas was a financial center in its own right \u2014 and its distance from New York is what made it an important one.\u00a0<\/p>\n Dallas is home to one of the 12 regional banks of the Federal Reserve, many of which were strategically placed in financial backwaters as a means to decentralize the US banking system.\u00a0<\/p>\n The idea was to distribute the Fed\u2019s power across regions \u2014 not just to reflect economic diversity, but also to insulate monetary policy from concentrated political or financial influence.<\/p>\n That may seem like an anachronism in today\u2019s world of megabanks and seemingly all-powerful Fed chairs.\u00a0<\/p>\n But the threat of centralized power is neither theoretical nor historical, as has been illustrated by the president\u2019s recent threats to fire Chair Powell for failing to cut interest rates.<\/p>\n Last week, however, the Supreme Court ruled<\/a> that the president does not have the power to remove the Fed chair or any other board members of the Federal Reserve.\u00a0\u00a0<\/p>\n Instructively, the same ruling found that the president likely does<\/em> have the authority to fire appointees at federal agencies like the NLRB and MSPB.<\/p>\n But the Federal Reserve is exempt, the majority reasoned, because the central bank is \u201ca uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.\u201d<\/p>\n This was always the plan.<\/p>\n What makes the structure of the Federal Reserve \u201cunique\u201d is that it\u2019s not one bank, but many \u2014 and with several in places like Dallas.<\/p>\n The Federal Reserve was designed as a group of semi-independent regional banks to better resist the centralization of financial power, be it in New York or DC.<\/p>\n Putting some of those banks in economic backwaters like Dallas wasn\u2019t an accident; it was a way to hardwire decentralization into the system.<\/p>\n In 1914, when Dallas was chosen as a site for a regional Federal Reserve bank, its population of 131,278 made it the 58th-largest city in the US.<\/p>\n
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