A conservative Republican and a progressive Democrat in the United States Senate introduced legislation to replace the internal watchdog of the Federal Reserve (Fed) with one appointed by the President, with the aim of strengthening banking supervision after the Silicon Valley bankruptcies Bank (SVB) and Signature Bank.
Republican Rick Scott and Democrat Elizabeth Warren blamed the bankruptcies of both banks on regulatory failures by the US central bank, which has so far operated with an internal inspector general who reports to the Fed’s board.
Our legislation fixes that by establishing an inspector general at the Fed appointed by the President and confirmed by the Senate, just like any other major government agency,” Scott said in a joint statement with Warren.
He said this month’s banking disruptions “have highlighted the urgent need for a truly independent inspector general to hold Fed officials to account for any lapses or wrongdoing.”
The Federal Reserve has not commented on the proposal.
The legislation, introduced yesterday, would replace the Fed’s inspector general with an independent one that would oversee the institution and the Consumer Financial Protection Bureau.
The Consumer Financial Protection Bureau (CFPB) is technically inside the Federal Reserve system, but it functions entirely on its own, except for one key factor: It is funded by transfers from the Fed.
Warren played a key role in the creation of the CFPB under President Barack Obama after the 2007-2008 financial crisis. The US Supreme Court last month agreed to hear a case challenging the CFPB’s funding structure, which some conservatives say violates the US Constitution,
Cooperation between Scott and Warren, who are often on opposite ends of the political spectrum, could be the start of a new bipartisan push on banking.
Warren is a leading voice on financial matters. He sits on both the Senate Banking and Finance Committees, and chairs subcommittees on both.
Scott, a former governor of Florida, is a hardline conservative who has positioned himself as a fiscal hawk.
