Republican Senators Introduce Legislation to Reform Fed

Last month, as one of his last acts before leaving the Senate this week, Committee on Banking, Housing, and Urban Affairs Ranking Member Sen. Pat Toomey (R-Pa.) introduced the Federal Reserve Accountability Act, which a press release from his office says would increase accountability, ensure greater diversity, and address Democratic-leaning activism within the Federal Reserve.

“Despite their narrow and nonpartisan statutory mandates, the Fed and regional Fed banks have increasingly inserted themselves into politically-charged issues like global warming and social justice,” Toomey said. “Congress has a responsibility to ensure the Fed does not become a political actor.”

To address what Toomey says are problems with bias, the legislation reduces the number of Fed regional banks from twelve to five, which will allow for more effective congressional oversight and help limit the concentration of power in Washington. This will also help ensure that all presidents of Fed regional banks have permanent seats on the Federal Open Market Committee (FOMC).

To increase accountability, the bill will make the General Counsel and all presidents of Fed regional banks presidentially-appointed, Senate-confirmed positions. It will apply the federal Anti-Lobbying Act to the Fed Board of Governors and Fed regional banks to prohibit federal resources from being used for political lobbying at the state or federal level.

Additionally, the bill will strengthen geographic diversity requirements for Fed Governors so that they represent more than the Beltway. It will also impose new residency requirements on Fed regional bank presidents so that they are actually from their Fed district.

In the past two years, Toomey has regularly raised concerns about the Fed’s increasing focus on politically-charged issues, as have independent economists and academics. The bill was cosponsored by Senators Kevin Cramer (R-N.D.), Ted Cruz (R-Texas), Bill Hagerty (R-Tenn.), Mike Lee (R-Utah), Cynthia Lummis (R-Wyo.), and Thom Tillis (R-N.C.).