Sens. Rick Scott (R-FL) and Elizabeth Warren (D-MA) will introduce legislation to require an independent inspector general for the Federal Reserve and Consumer Financial Protection Bureau.
The proposal comes after the collapse of Silicon Valley Bank and amid a chorus of concerns and questions from lawmakers about how it happened and what can be done to prevent other bank failures. In a letter to Fed Chairman Jerome Powell, Scott blasted the Fed for an “unacceptable lack of accountability.”
“For too long, the Federal Reserve has used its claim of independence to thwart Congress and the American people while being unable or unwilling to properly regulate and supervise the large financial institutions under its care,” the Florida Republican wrote.
While the Fed already has an inspector general, Mark Bialek, Scott and Warren contended that the role isn’t independent enough. Currently, the internal watchdog reports to the Fed board. At other big agencies, the inspector general reports to an independent auditor.
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“The recent bank collapses and regulatory failures by the Fed have underscored the urgent need for a truly independent Inspector General to hold Fed officials accountable for any lapses or wrongdoing,” Warren said in a statement.
“Last year, during the largest ethics scandal in the history of the Federal Reserve System, I led a bipartisan bill to bolster accountability at the Fed, and I appreciate Sen. Scott’s work to advance this effort,” she added.
The legislation would create a presidentially appointed and Senate-confirmed inspector general who would oversee the Fed and the CFPB, which was created in the aftermath of the global financial crisis.
The push makes for odd bedfellows, given that Scott is a conservative senator and Warren ranks as one of the most liberal.
Warren has been one of the most vocal critics of Powell and the Fed. Also this week, Warren, along with Sen. Bernie Sanders (I-VT) and others, sent a letter to Michael Barr, the vice chairman for supervision at the Fed, calling for the central bank to crack down on large regional banks that have assets between $100 billion and $250 billion.
“The fall of both SVB and Signature, the near-crash of First Republic, and the struggles of other regional banks shed new light on the systemic [importance] of banks with assets totaling between $100 billion and $250 billion,” they wrote.
The Fed news comes as the central bank’s Federal Open Market Committee meets to decide whether to hike interest rates once again. The Fed has been raising rates for a year to smother too-high inflation, although, with the collapse of SVB, some are calling on the Fed to pause its rate hiking given the banking system turmoil.
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Still, most expect the Fed to revise its key overnight rate up by 0.25 percentage points to 4.75% to 5% — the highest it has been since 2007.
The Washington Examiner reached out to the current Fed inspector general’s office for comment on the Scott-Warren legislation.