Senators Rick Scott (R-FL) and Elizabeth Warren (D-MA) Tuesday introduced bipartisan legislation to increase accountability and independence at two key financial regulatory bodies: the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau (CFPB).
The proposed bill would require the Inspector General (IG) for both the Federal Reserve Board and the CFPB to be appointed by the President and confirmed by the Senate. This represents a significant change from the current system, where the IG is appointed by and reports directly to the leadership of the respective agencies.
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The lawmakers argue that the current structure creates a serious conflict of interest, compromising the IG’s ability to conduct independent oversight. They contend that an IG appointed by and beholden to the agency they are supposed to watchdog cannot effectively investigate potential misconduct, ethical lapses, or regulatory failures.
The legislation was introduced following the senators’ concerns regarding accountability at the Federal Reserve. The senators also sent a letter to Federal Reserve Chairman Jay Powell outlining their concerns and the necessity for structural changes to the IG position.
Their letter specifically referenced former Fed Board-appointed Inspector General Mark Bialek, alleging he “failed to hold Federal Reserve employees accountable” amidst various issues, including ethics concerns, insider trading allegations, and recent bank failures.
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“The Federal Reserve has been wildly unaccountable for years under Jay Powell’s leadership, who has overseen regulatory failures, allegations of insider trading, and unethical practices at the Fed that have been overlooked and enabled by the Board’s hand-picked Inspector General,” Scott said. “The Federal Reserve is the world’s largest and most powerful central bank, yet the current Inspector General directly reports to the Fed’s Board, presenting a clear conflict of interest with a perverse pay structure that enables issues to go unchecked for too long at the expense of the American people. That’s insane.”
Scott emphasized the need for change: “We need significant changes at the Federal Reserve to bring the transparency and accountability that the American people deserve. Our bill will take a huge step forward in fixing the Federal Reserve by implementing a truly independent, Senate-confirmed IG at the Fed that will work on behalf of the American people, not Jay Powell.”
Warren highlighted the critical role the Fed plays and the need for robust oversight.
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“The Fed makes critical decisions that impact our entire economy—and bank collapses, regulatory failures, and the culture of corruption at the Fed have underscored the urgent need for a truly independent Inspector General to hold Fed officials accountable,” Senator Warren stated. “I’m glad to partner with Senator Scott on this bipartisan bill to deliver oversight the American people deserve.”
The proposed legislation would amend Chapter 4 of Title 5, United States Code, to include the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection among the entities whose Inspectors General are subject to Presidential appointment and Senate confirmation.
By requiring a presidentially-appointed and Senate-confirmed Inspector General, the senators aim to establish a watchdog with greater independence and authority to investigate and report on waste, fraud, and abuse within these powerful financial agencies, ensuring they operate with transparency and accountability to the American public.
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