GAO finds Obama-era Fed guidance should have been issued as rules

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WASHINGTON — The Government Accountability Office has determined that three pieces of guidance issued by the Federal Reserve during the Obama administration qualified as regulations that should have been subject to congressional review.

A group of five Republican senators asked the GAO in February to examine supervisory guidance related to the Fed's large-bank supervision framework that they said imposed “substantive requirements relating to capital, liquidity, corporate governance, and recovery and resolution planning.”

Responding to the senators Tuesday, the GAO agreed that three of the four guidance letters should have all been issued as rules. They included the Fed’s 2011 supervisory guidance on model risk management, guidance from 2014 on consolidated recovery planning for large banks and guidance from 2012 on a new supervision framework for large banks.

The GOP senators — Mike Crapo of Idaho, Thom Tillis of North Carolina, Mike Rounds of South Dakota, David Perdue of Georgia and Kevin Cramer of North Dakota — also asked the GAO to give an opinion on whether a 2015 guidance letter outlining the governance structure of the Fed's supervisory program would be legally considered a rule, but the GAO found that it was not a rule.

Rules issued by federal regulators are subject to the Congressional Review Act, whereas guidance is not. The Congressional Review Act gives lawmakers the opportunity to overturn a rule if they see fit.

“I applaud the GAO for holding the Federal Reserve to the same standard as all government agencies and ensuring they abide by the Administrative Procedure Act to remain transparent and accountable to Congress,” Tillis said in a statement. “Federal regulatory agencies should not be using rules improperly to place unnecessary regulations on financial institutions, and I will continue to work with my colleagues to hold regulatory agencies accountable.”

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