WASHINGTON — Though the Federal Reserve Board remains the leading candidate to assume oversight of systemically risky firms, two Senate votes last week demanding that the central bank hand over details about its activities demonstrated its waning political support.
An analysis by American Banker, an affiliate of Credit Union Journal, found many in Washington critical of the Fed since the financial crisis took hold in 2007, with leaders of both parties saying it could have done more to stop the housing collapse.
But last week’s votes went well beyond criticism and appeared to be the first effort by lawmakers to dictate operations at the central bank. The amendments would force the Fed to disclose the identities of discount window borrowers and to reveal more information about its financial rescue programs.
“At least since the late Reagan era, the federal government has kept its hands off the Fed and has respected its independence,” Chris Low, the chief economist for First Horizon National Corp.‘s FTN Financial, told American Banker. “This is the first attack on that independence that we’ve seen in the legislature.”
The amendments, which were attached to the Senate budget resolution, are nonbinding and appeared to be meant largely as a message to the central bank.
The Senate voted 96 to 2 in favor of an amendment requiring the Fed to disclose how many institutions have participated in its liquidity facilities, detail the collateral it is accepting in return for access and reveal how much it is working with outside contractors to manage the facilities. The amendment, sponsored by Senate Banking Committee Chairman Chris Dodd (D-CT), and Sen. Richard Shelby of Alabama, the panel’s top Republican, was meant to address growing anger at the Fed while not thwarting its efforts to lend.
