Senators take aim at Fed's dependence on shared staff

Reuters News
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Posted: May 07, 2015 3:56 PM

By Michael Flaherty

WASHINGTON (Reuters) - Two U.S. senators introduced a bill on Thursday that aims to provide each Federal Reserve governor with staffers instead of sharing them as is now the case, in a move aimed at promoting more independence inside the Fed's board.

The bipartisan bill, introduced by Senators David Vitter and Elizabeth Warren, would also require a publicly recorded vote by the Fed board on the resolution of any enforcement action that includes $1 million or more in payments.

The proposed legislation comes as the Senate Banking Committee prepares to hash out a larger bill that aims to bring regulatory relief across the financial industry and to increase transparency of financial regulators.

The teamwork of Warren, a Massachusetts Democrat, and Vitter, a Louisiana Republican, shows that members of the committee are working together on financial regulation reform even amid partisan tensions elsewhere.

Chairman Richard Shelby wants one comprehensive regulation relief bill, but the committee's top Democrat, Sherrod Brown of Ohio, is resisting, according to people familiar with the matter, preferring a more targeted approach. (To read more about this click on)

Shelby has scheduled a mark-up on May 14, and is expected to publicly release a draft of the bill soon.

Whether Vitter and Warren's proposals are part of that bill is not yet clear.

Warren has spoken out about the Fed's staff dependence and its enforcement action policies before.

She and Vitter have also criticized the Fed's emergency lending practices, saying those policies favor too-big-to-fail banks. They said on Thursday they are working on legislation to address this issue as well.

The Federal Reserve board comprises seven members, including the chairman. They are appointed by the president and confirmed by the Senate.

The Fed board members share the central bank's staff, unlike other regulatory agencies like the Securities and Exchange Commission, where each commissioner has independent staffers reporting to him or her. Warren and Vitter say the policy makes the board too beholden to the chairman and staff directors.

The Vitter-Warren bill also requires a public vote by the Fed board on enforcement decisions above $1 million to ensure that the board review the matters - an effort to boost accountability for actions that critics maintain commonly let banks off with a slap on the wrist.

Currently, the board is not required to vote on whether to enter a settlement or resolve enforcement actions, Vitter and Warren said in a press release.

(Reporting by Michael Flaherty; Editing by Chizu Nomiyama and Christian Plumb)