House Republicans want to strip the New York Fed of a crucial power

A Republican Congressman wants to strip the Federal Reserve Bank of New York of one of its key powers, and it could have a big impact on when and how the Fed makes its next rate decision.

Next Wednesday in the House Financial Services Committee Monetary Policy and Trade Subcommittee hearing on Federal Reserve reform, it is expected Michigan Republican Bill Huizenga will pitch legislation to kill the 'permanent' status granted to the New York Fed on the Federal Reserve System's Federal Open Market Committee (FOMC).

In short, it will remove a key distinction that sets the New York Fed apart from other banks: the NY Fed president always has FOMC representation.

Each of the Federal Reserve Board of Governors is a member of the FOMC, along with a rotating group of presidents of regional Federal Reserve Banks. The only exception is New York and its president, William Dudley.

The FOMC is the Fed committee that makes key monetary policy and regulatory recommendations within Federal Reserve System. Presidents of the other eleven Federal Reserve banks rotate in and out of the remaining four FOMC slots. And for some, the New York Fed's elevated status within the FOMC has been a source of frustration.

If House Republicans are successful, the New York Fed's presence and power on the FOMC could be substantially diminished.

Huizenga is chairman of the subcommittee that will discuss Federal Reserve reform next Wednesday. Because the FOMC makes the decision on when to raise interest rates, the potential legislation comes at a crucial time.

The legislation being considered by Huizenga could make New York split the 'permanent' seat with another city's central bank president, one source told Business Insider.

A second source said that another possibility for the legislation would include giving every Federal Reserve Bank president an equal opportunity to sit alongside the Federal Reserve Board of Governors that make up the FOMC.

The potential legislation to alter the FOMC is part of an ongoing escalation of rhetoric between House Republicans who have pushed the central bank to become increasingly transparent.

However, the entire party is not lining up behind the legislation now being considered. New York Republican Peter King sits on the House Financial Services Committee and said he would oppose legislation to remove the New York Federal Reserve from the FOMC.

"New York carries the country's monetary policy and executes open market operations on a daily basis," King said to Business Insider on Friday through a spokesman. "I will not support any legislation that attempts to do this and hope as the legislative process continues, common sense will prevail."

For some, the legislation might not sound new. That's because it isn't, technically.

Richard Fisher is the former president of the Federal Reserve Bank of Dallas and he has previously called upon the Fed to strip the New York branch of its permanent FOMC status in his retirement speech earlier this year.

Fisher believes votes should be distributed evenly so that New York is given equal input with other U.S. cities' Federal Reserve Banks like Chicago and Cleveland. The Federal Reserve has so far resisted Fisher's calls for change.

The Federal Reserve Bank of New York declined to comment. Business Insider also reached out to Huizenga's office and other GOP lawmakers that sit on the House Financial Services Committee Monetary Policy Subcommittee on Monetary Policy and Trade. None responded by publication time.