The regulators are about to get some watchmen of their own.
As Reuters reported Friday (March 4), a watchdog agency based in the United States is getting ready to look into whether the United States Federal Reserve, along with other regulators, has been lax in overseeing the country’s financial institutions. The push, said the newswire, comes from Democratic lawmakers who requested that such scrutiny be conducted, in a move that Reuters said “marks the latest sign of distrust between Congress and the central bank.”
The Democrats’ push came a few months ago, in Oct. 2015, when Reps. Maxine Waters (D-CA) of the House Financial Services Committee, along with Al Green (D-TX), who serves on the House Subcommittee on Oversight and Investigations, prodded the Government Accountability Office to begin a probe of “regulatory capture” with an eye on the New York Federal Reserve. Such a probe would be the very first initiative by an agency to officially look into whether the Fed is, in fact, too lax with oversight of the financial institutions, at the taxpayers’ expense.
In further information, the GAO has “not yet determined,” according to Reuters, whether the probe may extend, or if it will extend, to entities other than the Fed, such as the Federal Deposit Insurance Corp.
The two House representatives said they remained concerned about the specter of a “revolving door” between the New York Fed and the banks that it oversees, with some “reluctance to challenge” those banks, the newswire reported. Key areas for investigation include actions undertaken by the Fed between Jan. 2008 and Jan. 2015, meriting what could be viewed as a “case study” for the initiative. The investigation would focus on regulatory independence and incentives that would lure regulators to move to jobs at the very banks they oversee.