Senators Introduce Legislation Aimed at FRB Accountability

U.S. Senators Elizabeth Warren (D-MA) and David Vitter (R-LA) introduced the Fed Accountability Act (S. 1248), which is intended to increase independence of individual Governors on the Board of Governors of the Federal Reserve System (“FRB”) and to bring transparency by requiring a formal vote on all enforcement actions resulting in fines over $1 million.

According to the sponsors (the text of the bill is not yet posted on the Congressional website), the bill would allow each member of the FRB his or her own staff. Additionally, the bill would require a publicly recorded vote by FRB members on the resolution of any enforcement action that includes $1 million or more in payments.

The bill was introduced on May 7, 2015, and referred to the Committee on Banking, Housing, and Urban Affairs.

Lofchie Comment: What is odd about this bill is that it appears inconsistent with the manner in which Dodd-Frank’s Consumer Financial Protection Board (“CFPB”) was established, largely at the direction of not-yet-Senator Warren. That is, the CFPB was put under the FRB, with the CFPB’s budget and powers insulated from Congressional oversight. Further, because the CFPB was to be run by a single director, and not by a commission, there was no possibility of dissent within the organization, and obviously there was no need for a vote when there was only one vote. (Here is a link to a Huffington Post news story in which Senator Warren argues for keeping the CFPB outside of Congressional control. Here is a link to a Cadwalader Clients & Friends memo that we wrote three years ago raising policy questions as to the structure of the CFPB, particularly concerning the fact that it seemed to be structured as to be largely outside of the control of the three established branches of the government.)

Does Senator Warren’s sponsorship of this bill indicate a change in direction of her thoughts as to how the CFPB should be run or would she have it continue to operate in its current fashion? Furthermore, if one is not concerned about “groupthink,” doesn’t it follow that one should favor multi-member commissions (as we have at the SEC and CFTC), rather than the single-director structure of CFPB?