By David Morgan
WASHINGTON (Reuters) – A conservative Republican and a progressive Democrat in the U.S. Senate are introducing legislation on Wednesday to replace the Federal Reserve’s internal watchdog with one appointed by the president, aimed at tightening bank oversight following Silicon Valley failures Bank and Signature Bank.
Republican Rick Scott and Democrat Elizabeth Warren blamed the collapse of the two banks on regulatory failures at the US central bank, which until now operated with an internal inspector general reporting to the Fed board.
“Our law fixes that by establishing a presidentially-appointed, Senate-confirmed inspector general at the Fed, like every other major government agency,” Scott said in a joint release with Warren.
Warren said this month’s banking turmoil “underscores the urgent need for a truly independent inspector general to hold Fed officials accountable for any mistakes or wrongdoing.”
The Federal Reserve was not immediately available for comment.
The law is due to be introduced later on Wednesday. According to a four-page legislative text, the proposal would replace the Fed’s inspector general with an independent IG to oversee the Federal Reserve and the Consumer Financial Protection Bureau. The CFPB is an independent bureau within the central bank responsible for consumer protection within the financial sector.
Warren played a key role in setting up the CFPB under Democratic President Barack Obama following 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 argue violates the US Constitution.
The cooperation between Scott and Warren, who normally reside on opposite poles 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 Committee and the Senate Finance Committee, and chairs subcommittees of both panels.
Scott, a former governor of Florida, is a hardline conservative who has positioned himself as a leading fiscal hawk.
The display of bipartisanship contrasts sharply with the partisan standoff between Republicans and Democratic President Joe Biden over the nation’s $31.4 trillion debt ceiling, raising concerns in financial markets about a protracted debate that could damage the economy. of the US.
Both Republicans and Democrats have promised tighter oversight of banking regulators following the collapses of Silicon Valley Bank and Signature Bank, which followed billions of dollars in losses for financial stocks.
“We could end up in one of these weird situations,” said Chris Brown, a banking lobbyist and former staffer on the House of Representatives’ Financial Services Committee, which oversees the banking industry.
“I think there’s a lot of concern about what happened here,” he said.
House Financial Services Committee Chairman Patrick McHenry, a North Carolina Republican, and the panel’s top Democrat, Maxine Waters, have jointly scheduled a March 29 hearing on the banking system that will feature testimony from officials in Fed and Federal Deposit Insurance Corporation (FDIC). ).
(Reporting by David Morgan and Heather Timmons; Editing by Scott Malone and Jonathan Oatis)
