Two U.S. senators on the Banking, Housing and Urban Affairs Committee have introduced legislation that would open the Federal Reserve's 12 regional banks to more public scrutiny.
Under the proposed law, the Financial Regulators Transparency Act of 2022, the banks would be subject to the Freedom of Information Act (FOIA) and the Federal Records Act, among other reforms. The banks are not currently subject to those laws, as they are considered to be quasi-private institutions, Reuters reported.
“Specifically, the Financial Regulators Transparency Act would strengthen transparency and accountability at the Fed and other financial regulatory agencies through three categories of reforms,” said a statement issued by the Committee. They are Federal Reserve regional bank reforms, financial regulator reforms, and Federal Reserve Inspector General (IG) reforms.
The bill was introduced by Sens. Elizabeth Warren (D-Mass.) and Pat Toomey (R- Pa.), who is the ranking member.
“During the largest ethics scandal in the history of the Federal Reserve system, Fed officials have stonewalled the American people and slow-walked their representatives in Congress," said Sen. Warren. "This bipartisan bill is a necessary response to ensure that no financial regulators can ignore congressional oversight into ethics failures, and finally deliver more transparency and accountability for any wrongdoing.”
In a Nov. 7 oversight letter, Sen. Warren described the scandal she referred to in her recent statement: "In September of last year, the Fed became embroiled in scandal when [there were] reports that then-Boston Reserve Bank Presidents Eric Rosengren and then-Dallas Reserve Bank President Robert Kaplan had been actively trading individual stocks and investments while helping set key Fed policies during the pandemic." She also wrote, "The following month, news broke that Vice Chair Richard Clarida had traded out of a bond fund and into stock funds one day before Chair Powell issued a statement announcing the Fed would be prepared to use its tools as the pandemic worsened." And she reported that this past October, "Atlanta Federal Bank President Raphael Bostic reported that he 'failed to previously disclose financial transactions on his official central bank forms—including ones that ran afoul of Fed rules that limit trading ahead of Federal Reserve meetings.'"
“The Fed and regional Fed banks, despite being creatures of Congress, obstruct congressional oversight inquiries all too often,” said Sen. Toomey. “In light of this persistent refusal to comply with reasonable requests for information from both Republicans and Democrats, I’m glad to join with Senator Warren in pursuing reforms that will compel these public institutions to be more transparent and accountable to the American people.”
One observer was skeptical of the legislation’s prospects for passage.
“We see this bill as unlikely to pass but it has enough bipartisan interest to attract ongoing attention,” Krishna Guha, an analyst at Evercore ISI, was quoted by Reuters as telling clients.