The legislation comes after lawmakers said the Federal Reserve did not do enough to prevent the failures of Silicon Valley Bank and Signature Bank.

The legislation comes after lawmakers said the Federal Reserve did not do enough to prevent the failures of Silicon Valley Bank and Signature Bank. PATRICK T. FALLON/AFP via Getty Images

Senators Want a More Independent IG to Oversee the Federal Reserve in the Wake of Bank Failures

The IG office says it already is providing “robust oversight.” 

A bipartisan pair of senators introduced a bill on Wednesday that they said would make the Federal Reserve watchdog more independent. 

Sens. Rick Scott, R-Fla., and Elizabeth Warren, D-Mass., introduced this bill to address what they deemed the “gross mismanagement and lack of oversight” by the Federal Reserve in the lead-up to the Silicon Valley Bank and Signature Bank’s failures. The bill would make the Federal Reserve inspector general subject to appointment by the president and confirmation by the Senate, in an effort to boost independence and accountability.  

“Currently, there are more than 30 federal agencies that have a presidentially appointed, Senate confirmed inspector general,” said a graphic from Scott’s office. “Why isn’t the Federal Reserve one of them?”

A spokesperson for the IG office told Government Executive in a statement on Thursday: “Consistent with the IG Act, we have the same independence and authorities afforded to all inspectors general to audit and investigate the Board. We have and will continue to provide robust oversight over both the [Board of Governors, which oversees the Federal Reserve System] and the [Consumer Financial Protection Bureau].” 

CFPB, a financial protection watchdog for consumers, is an independent bureau within the Federal Reserve System and the two share certain rulemaking authorities. Warren played a key role in creating the CFPB. 

The Federal Reserve and consumer bureau IG is appointed by the chair of the Board of Governors. The IG “reports to the Board of Governors and the director of the CFPB and has an independent reporting responsibility to Congress,” the watchdog’s website reads. “All inspectors general are appointed without regard to their political affiliation and based on their integrity and their ability in accounting, auditing, financial analysis, law, management analysis, public administration, or investigations.” 

A recent report from the Congressional Research Service stated that 27 IGs are nominated by the president and confirmed by the Senate, 36 are appointed by an agency or entity head and one is appointed by the president without Senate confirmation. 

“Functionally, it's hard to say how Senate advice and consent over the Federal Reserve IG's appointment would have impacted the office's work to oversee policies and agency decisions related to Silicon Valley Bank and Signature Bank,” said Liz Hempowicz, vice president for policy and government affairs at the nonprofit Project on Government Oversight. “That said, I'm almost always supportive of congressional efforts to have more insight into and oversight over the work of inspectors general and this bill is a good way to accomplish that with regards to the Federal Reserve.”

When asked about the bill during the briefing on Wednesday, White House Press Secretary Karine Jean-Pierre said the administration doesn’t have a position on that at this time. The Federal Reserve and CFPB declined to comment on the bill. 

Warren, along with Sen. Pat Toomey, R-Pa., introduced different legislation in December that would subject the regional Federal Reserve banks to the Freedom of Information Act; require financial regulators to give ethics-related information to members of Congress; and make the IG subject to presidential nomination and Senate confirmation, among other accountability measures. The bill did not come up for a vote.