By Harriet Torry 

Two regional Federal Reserve bank presidents who have opposed proposed operational changes to their institutions will testify at a congressional hearing on the topic next week.

Kansas City Fed President Esther George, and Richmond Fed President Jeffrey Lacker are scheduled to testify Sept. 7 at 10 a.m. ET at a hearing before the House Committee on Financial Services' Subcommittee on Monetary Policy and Trade on the regional Fed banks' governance "and how it relates to the conduct of monetary policy and economic performance."

Mr. Lacker, long a defender of the current structure of the Federal Reserve system, has pushed back against calls to end the quasi-private nature of the 12 regional Fed banks, and against recent legal changes affecting their relationships with private banks.

While the Washington-based Federal Reserve Board is purely part of the government, with top officials chosen by the president and subject to Senate approval, the regional Fed banks fall into a gray area. They are essentially owned by local banks that purchase shares in their respective regional bank and receive dividend income in exchange.

The regional Fed banks are also overseen by boards of directors drawn from the private sector. Some directors are selected by the Fed in Washington, while others are elected by the banks that own shares in the regional Fed. Regional Fed bank presidents are selected and overseen by their local boards -- directors from financial institutions don't participate in this process -- subject to the approval of the Fed board in Washington.

Mr. Lacker has argued that the current setup gives the central bank the "political independence" to make the best possible monetary policy.

Ms. George last year voiced opposition to proposed changes to the Fed's regional structure that would have seen billions of dollars returned to banks which paid to be members of the Fed system. The proposal ultimately wasn't included in the 2016 federal spending package.

Write to Harriet Torry at harriet.torry@wsj.com

(END) Dow Jones Newswires

August 31, 2016 17:00 ET (21:00 GMT)

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