The Federal Reserve Board is "mounting a concerted effort" to cover up waste and abuse in its check-clearing system, Rep. Henry B. Gonzalez, D-Tex., charged this week.
Rep. Gonzalez, the House Banking Committee's ranking Democrat, repeated calls for hearings to investigate whether the Fed unfairly competes with private-sector couriers and bilks taxpayers by subsidizing a fleet of planes to ferry checks across the country.
He first leveled the charges in January, following a one-year investigation by the House Banking Committee's Democratic staff.
On Monday, Rep. Gonzalez complained in a written statement that a "cursory, dismissive" response from Fed Chairman Alan Greenspan convinced him "there is a lot more dirt under the rug."
"The stonewalling and obstructionist tactics will only provoke more questions," he said.
Rep. Gonzalez charged in January that the Fed is violating the Monetary Control Act of 1980 because fees charged to banks aren't high enough to cover the cost of check-clearing services.
In a two-page April 29 letter to Rep. Gonzalez, Mr. Greenspan said the Fed has found no evidence of illegal action by the Federal Reserve Bank of Boston, which runs the check-clearing operation, known as the Interdistrict Transportation System, or ITS.
Mr. Greenspan said the law does not require the Fed to cover ITS costs separately. Rather, total revenue from all fee-based services must be sufficient to pay their combined expenses.
But Rep. Gonzalez said internal Fed documents indicate that the agency understood the Monetary Control Act requires fees be sufficient to recover specific check-clearing costs.
The investigation unveiled a Fed practice of subsidizing bank check clearing while overcharging the U.S. Treasury for the same service.
According to the January report, the Treasury was charged almost $5 a pound to transport checks, while the fee for commercial checks is $3.10 a pound.
The Fed's practices unfairly block private courier firms from competing for check-clearing business and burden taxpayers with the higher fees charged to the Treasury.
Furthermore, Rep. Gonzalez said five ITS employees have documented Fed attempts to cover up its illegal subsidies of a private air carrier's fuel purchases.
Federal Reserve officials Tuesday had no comment on Rep. Gonzalez' latest charges. House Banking Committee Chairman Jim Leach has not decided whether to hold hearings, a spokesman said.
