FILE PHOTO: U.S. Senator Rick Scott (R-FL) gestures as he speaks at the Conservative Political Action Conference (CPAC) at Gaylord National Convention Center in National Harbor, Maryland, U.S., March 2, 2023. REUTERS/Sarah Silbiger
By David Morgan
WASHINGTON (Reuters) – Republican U.S. Senator Rick Scott said on Monday he will introduce legislation to create an independent inspector general to oversee the Federal Reserve, as he called the U.S. central bank “unable or unwilling to properly regulate” banks in a letter to Fed Chair Jerome Powell.
Scott, a Republican known for his hardline conservative positions, informed Powell of his plans in a March 20 letter that questioned the U.S. central bank’s ability to oversee the banking system, following the collapse of Silicon Valley Bank and Signature Bank (NASDAQ:SBNY) earlier this month.
“I am proposing legislation to establish a presidentially-appointed and Senate-confirmed inspector general for the Federal Reserve,” Scott told Powell in the letter. “Would you support adding this much-needed level 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,” Scott wrote.
There was no immediate response from the Fed.
Scott is expected to introduce the legislation later this week, according to an aide.
Republicans and Democrats in Congress have pledged tighter oversight of banking regulators following the collapse of Silicon Valley Bank and Signature Bank, which has been followed by billions of dollars in losses for financial stocks.
The Federal Reserve is responsible for supervising – monitoring, inspecting and examining – certain financial institutions to ensure that they comply with rules and regulations, and that they operate in a safe and sound manner.
Some lawmakers have singled out the San Francisco Federal Reserve Bank for criticism, among them Democratic Senator Elizabeth Warren, who told an interviewer on Sunday that she does not have faith in the bank’s president, Mary Daly.
The San Francisco Fed was responsible for oversight of Silicon Valley Bank.
Scott’s legislation stems from concern in Congress that the Federal Reserve’s current inspector general is not independent enough to serve as a check on the central bank.
When Congress created Inspectors General in the 1970s, the Federal Reserve was a much smaller and less complicated entity, said Andrew Levin, an economics professor at Dartmouth and a former Fed official.
The Fed was assigned an internal IG that reports directly to the Fed board, rather than a completely independent auditor, like the Pentagon or other big agencies.
Scott also urged the Fed chief to use the central bank’s policy meeting this week to examine the bank failures and identify accountable Fed personnel.
“The failures and malfeasance, not only of these banks, but their regulators, should be at the top of the agenda,” Scott said.
“Before the meeting concludes, it is my expectation that you name the individual(s) being fired for these failures, and make clear your support for significant accountability measures at both the Federal Reserve and our banks.”