Toomey, Warren Unveil Bipartisan Legislation to Advance Federal Reserve Accountability, Ensure Financial Regulators Provide Ethics Information to Congress
Financial Regulators Transparency Act would subject regional Federal Reserve Banks to FOIA, require financial regulators to provide ethics-related information to Congress, and make the Fed IG a Senate-confirmed position
Washington, D.C. – United States Senators Elizabeth Warren (D-Mass.) and Pat Toomey (R-Pa.), Ranking Member of the Senate Banking Committee, announced the bipartisan Financial Regulators Transparency Act, legislation that would strengthen Federal Reserve accountability and ensure that no financial regulator can withhold critical ethics-related information from Congress. The bill would subject the regional Federal Reserve Banks to the Freedom of Information Act (FOIA) and ensure their responsiveness to congressional information requests; align the Fed with other large agencies by making its Inspector General a presidential appointee; and prohibit all financial regulatory agencies from denying congressional requests for ethics-related information. Together, these reforms would strengthen congressional oversight of the Fed and other financial regulatory agencies.
“The Fed and regional Fed banks, despite being creatures of Congress, obstruct congressional oversight inquiries all too often,” said Senator Pat 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.”
“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 Senator Elizabeth 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.”
Specifically, the Financial Regulators Transparency Act would strengthen transparency and accountability at the Fed and other financial regulatory agencies through three categories of reforms:
Federal Reserve Regional Bank Reforms
- Subjects the regional Federal Reserve Banks to FOIA and Federal Records Act (recordkeeping law), as they are not currently subject to these laws.
- Provides all members of Congress the same ability to obtain information from the Fed regional banks that congressional committee chairs currently have to obtain info from other federal agencies, with some exceptions.
- Forbids Fed regional banks from withholding info requested by a member of Congress under FOIA on the grounds that the info is privileged pursuant to a common law privilege.
- Provides that Fed regional banks must prioritize FOIA requests made by a member of Congress.
- Prevents Fed regional banks from charging a member of Congress fees to process their FOIA request.
- Gives a member of Congress who has filed a FOIA request standing to bring a federal lawsuit against Fed regional banks to petition the court to order them to produce any record improperly withheld.
Financial Regulator Reforms
- Provides all members of Congress the same ability to obtain ethics-related information from financial regulators that congressional committee chairs currently have to obtain information from the financial regulators: the Fed Board and Reserve Banks, CFPB, SEC, FDIC, OCC, NCUA, and FHFA.
- Forbids financial regulators from withholding info requested by a member of Congress under FOIA on the grounds that the info is privileged pursuant to a common law privilege.
- Provides that financial regulators must prioritize FOIA requests made by a member of Congress.
- Prevents financial regulators from charging a member of Congress fees to process their FOIA request.
- Gives a member of Congress who has filed a FOIA request standing to bring a federal lawsuit against financial regulators to petition the court to order them to produce any record improperly withheld.
Federal Reserve Inspector General (IG) Reforms
- Makes the Fed IG a presidentially appointed and Senate-confirmed position.
- Clarifies that the Fed IG does not need the permission of a Fed regional bank in order to conduct oversight of a Fed regional bank.
For over 18 months, Ranking Member Toomey’s efforts to oversee the Federal Reserve System, including the Fed’s process for awarding master accounts and Fed regional banks’ political activities, have been repeatedly stonewalled:
Fed Regional Banks Have Stonewalled Congressional Oversight of Fed Master Accounts
In January 2022, after President Biden nominated former Fed Governor Sarah Bloom Raskin to serve as the Federal Reserve’s Vice Chair for Supervision, the Committee discovered Ms. Raskin’s involvement in helping a non-bank financial technology (fintech) company, Reserve Trust, obtain access to the Fed’s special payment system, a master account.
- February 1, 2022 – Ranking Member Toomey sent a letter to the Kansas City Fed requesting information pertaining to its approval of Reserve Trust’s application for a Fed master account.
- February 11, 2022 – Senator Toomey sent a follow up letter after the Kansas City Fed refused to turn over documents and information that would corroborate its February 7th statement claiming the decision to reverse its denial of Reserve Trust’s application was because “[Reserve Trust had] changed its business model and the Colorado Division of Banking reinterpreted the state’s law.”
- February 15, 2022 – The Colorado Division of Banking disputed the Kansas City Fed’s prior claim that “the Colorado Division of Banking reinterpreted the state’s law in a manner that meant [Reserve Trust] met the definition of a depository institution.” In a statement to the press, the Colorado Division of Banking said the Kansas City Fed’s claim was a “misrepresentation” of its role.
- June 8, 2022 – Ranking Member Toomey sent a letter to the Kansas City Fed requesting a briefing and documents after learning that the Kansas City Fed had recently revoked Reserve Trust’s master account.
- June 16, 2022 – Kansas City Fed President Esther George wrote to Ranking Member Toomey claiming that the Kansas City Fed can’t provide any information regarding the revocation of Reserve Trust’s master account because it’s confidential supervisory information (CSI). Yet Ms. George told Ranking Member Toomey on a February 7th phone call that this information was not CSI because the Kansas City Fed is not a supervisor for Reserve Trust.
- June 16, 2022 – Kansas City Fed President Esther George responded by again refusing to turn over information to the Banking Committee.
- June 28, 2022 – Senators Toomey, Tim Scott (R-S.C.), Thom Tillis (R-N.C.), and Cynthia Lummis (R-Wyo.) sent a letter blasting the Kansas City Fed for yet again refusing to turn over information to the Committee.
- July 29, 2022 – In response to a Freedom of Information Act (FOIA) request by the American Accountability Foundation, the Fed revealed that it has records relating to Ms. Raskin and Reserve Trust.
- August 9, 2022 – Banking Committee Republicans sent a letter to the Fed criticizing it for failing to turn over these records relating to Ms. Raskin and Reserve Trust to the Banking Committee, or notify senators that they exist, even though they specifically requested them in February 2022.
To this day, the Kansas City Fed has refused to turn over a single document regarding Reserve Trust’s master account application.
Fed Board of Governors Have Stonewalled Congressional Oversight of Fed Master Accounts
- In August 2022, it was revealed that the Board of Governors does in fact have documents related to former Fed Governor Sarah Bloom Raskin’s involvement in helping secure a Fed master account for Reserve Trust.
- According to Bloomberg, on July 29, the Board of Governors responded to a Freedom of Information Act (FOIA) request by the American Accountability Foundation (AAF) and revealed that it has records relating to Ms. Raskin and Reserve Trust.
- After learning this information, Committee Republicans sent a letter blasting the Fed for refusing to notify the Committee that they were in possession of documents that Committee Republicans specifically requested six months ago.
Fed Regional Banks Have Stonewalled Congressional Oversight of Woke Political Activity
- March 29, 2021 – Ranking Member Toomey opened an investigation into the recent shift by regional banks of the Federal Reserve System toward publishing politically-charged research on ESG topics like global warming and racial justice. In a letter to the San Francisco Fed, Senator Toomey requested a briefing and documents no later than April 9, 2021.
- May 24, 2021 – Ranking Member Toomey expanded this investigation, requesting briefings and documents from the Minneapolis, Boston and Atlanta regional Fed banks by June 7, 2021 pertaining to their recent, intense interest in racial justice activism.
- June 30, 2021 – Ranking Member Toomey blasted the San Francisco, Minneapolis, Atlanta, and Boston regional banks for refusing to comply with congressional oversight requests for documents pertaining to the banks’ mission creep.
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