NEW YORK Wed Feb 11, 2015 11:27am EST

The Federal Reserve should revamp its rules to address perceptions of conflicts of interest and regulatory capture in the power centers of New York and Washington, the outspoken head of the Dallas Fed said on Wednesday.

Richard Fisher, addressing a New York audience for likely the last time before stepping down next month as president of the Dallas branch of the U.S. central bank, again warned against delaying an interest rate hike in the face of weak inflation.

But his most provocative remarks to economists here criticized a structure that he said "makes no sense" for the modern-day Fed.

Though they are unlikely to be taken up any time soon, Fisher suggested three key changes, including having six of the 12 regional Fed presidents voting on monetary policy alongside six Fed governors in Washington, with Fed Chair Janet Yellen as the tie-breaker.

He also said the New York Fed's permanent vote on policy should be rotated every two years among the regional Fed banks to address "the appearance of a conflict of interest."

Finally, Fisher said the "problem of regulatory capture" could be fixed by transferring oversight of Wall Street banks to supervisors from one of the other 11 district Fed banks. He said the Fed's "embedded" supervisors risk going easy on the too-familiar banks they are tasked with overseeing.

"I think we at the Fed must fully and frontally address the concern of many who feel that too much power is concentrated in the New York Fed," Fisher said in prepared remarks. "I understand the suspicions that surround the New York Fed."

Under longstanding Fed rules, the seven Fed governors in Washington and the head of the New York Fed have permanent votes on policy, while four of the remaining 11 regional presidents like Fisher rotate through voting slots every two or three years.

Giving regional Fed presidents more frequent votes "would take some of the heat off this "Audit the Fed stuff," he explained later in an interview on Fox Business Network, adding that the congressional proposal would "destroy" the United States.

The New York Fed has strongly denied accusations of a too-cozy relationship with Goldman Sachs Group Inc (GS.N) and other Wall Street banks.

New York Fed chief William Dudley, chair of the New York Economic Club, introduced Fisher and afterwards joked that Fisher's speech went "downhill" when he started talking about the New York Fed.