The Federal Reserve has reportedly withheld key documents that could have had serious repercussions for a Federal Reserve nominee ahead of a potential confirmation vote, leading many to call for greater central bank transparency and reform. from the country.
Senator Pat Toomey (R-PA), a senior member of the Senate Banking Committee, and Republicans on the committee asked Federal Reserve Chairman Jerome Powell for all correspondence relating to Reserve Trust, a fintech company that had received the lucrative main Fed account while Sarah Bloom Raskin served on the company’s board.
A Fed Main Account allows the company to earn interest on deposits with the Fed and facilitates the company’s ability to transfer large sums of money.
Raskin at the time was asked by President Joe Biden to serve as the Fed’s Vice Chairman for Oversight, and many Republicans on the Senate Banking Committee asked Raskin if she had used her influence as a former Fed Governor to secure the Fed’s main account.
“You leave the Treasury, you sit on the board of Reserve Trust for two years, their first application for a main account is denied, but after the first denial, you call the Federal Reserve and Reserve Trust receives a main account,” a said Senator Cynthia Lummis. (R-WY) told Raskin during a confirmation hearing in February. “The only state-chartered trust company in the country to get one, and you walk away with a million and a half dollars. Something is wrong with the way it happened.
Asked about her alleged pressure on the Fed to grant her company a primary account, she would not remember or know how to answer more than 35 questions from Toomey.
“Ms. Raskin is either suffering from the greatest case of selective amnesia since the FBI questioned Hillary Clinton about her mail server, or she is being uncanny with Congress because she knows it was misused. of Washington’s revolving door,” Amanda Thompson, spokeswoman for the Senate Banking Committee Republicans, said in February. “Even though Ms. Raskin claims not to recall whether she lobbied the Fed on behalf of Reserve Trust, she asserts, without any irony, that if she did it, it was done so ethically and completely honestly.”
Toomey even led a blockade of his nomination after the Fed and Raskin refused to release information about his role in seeking a lead Fed account.
Senate Banking Republicans were shocked to find that the Fed had responded to a Freedom of Information Act (FOIA) request from the American Accountability Foundation (AAF), not the committee, and that the Fed did indeed have related documents. to Raskin and Reserve Trust.
Although Biden withdrew her Fed nomination, issues surrounding her relationship with the Fed and the Reserve Trust could have influenced many senators’ opinions on whether to vote to confirm her for the Fed post.
The committee of Republicans said the Fed’s lack of transparency and accountability underscores the need to reform regional Fed and Federal Reserve banks:
Unfortunately, obstructionism has become an all-too-common response by the Fed and regional Fed banks – which, after all, are creatures of Congress – to demands for congressional scrutiny from members of both parties. In this case, the harm of this filibuster was amplified because it also obstructed the Senate’s constitutional responsibility to assess a presidential nomination. In light of this continued refusal to comply with reasonable requests for information, we have no choice but to pursue legislation that will require these public institutions to be more transparent and accountable to Congress.
Toomey floated a few ideas for making the Fed more accountable, including:
- Submit regional federal banks to FOIA
- Subject the regional Fed chairman to a presidential nomination and confirmation by the Senate; Sen. Jack Reed (D-RI) proposed this idea to the President of the New York Fed
- Consolidate regional federal banks or eliminate them altogether
Toomey explored these ideas in a letter to Minneapolis Fed Chairman Neel Kashkari in April and during a hearing with Fed Chairman Powell in March.
The letter that Republicans on the Senate Banking Committee wrote to Powell was the first time that a majority of Republicans on the committee had proposed reform of the Federal Reserve.