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Senator Toomey accuses Fed banks of dodging congressional requests

·3 min read
Pat Toomey (R-PA) speaks during a news conference to introduce the Republican infrastructure plan, at the U.S. Capitol in Washington, U.S., April 22, 2021. REUTERS/Erin Scott
Pat Toomey (R-PA) speaks during a news conference to introduce the Republican infrastructure plan, at the U.S. Capitol in Washington, U.S., April 22, 2021. REUTERS/Erin Scott

A leading GOP senator is threatening to draft “transparency and accountability” laws directed at the nation’s independent central bank after accusing four of the Federal Reserve’s regional banks of dodging Congressional requests for documents.

Pat Toomey of Pennsylvania, the top ranking Republican of the Senate Banking Committee, wrote to the Fed’s outposts in Boston, Atlanta, Minneapolis, and San Francisco in the spring asking for documents related to their research into climate change and racial inequity.

Toomey, who has argued that both topics are outside of the central bank’s purview, claims that none of the four reserve banks provided the documents he asked for.

“Congress may need to consider subjecting the [Federal Reserve regional banks] to the same transparency and accountability laws imposed on nearly every other federal agency or organization,” Toomey wrote in letters sent to all four banks Wednesday.

The presidents of all four banks offered meetings with Toomey, but the senator’s office claimed that those offers did not include “providing any records.”

In responses to Yahoo Finance, an Atlanta Fed spokesperson said that a staff briefing was held in June and a Minneapolis Fed spokesperson said the bank had sent a “lengthy written response” responding to Toomey’s questions. A Boston Fed spokesperson similarly told Yahoo Finance that it had sent a “detailed letter” to the senator’s office.

“We are aware of Sen. Toomey’s concerns, and we look forward to discussing them with his office,” a San Francisco Fed spokesperson told Yahoo Finance.

Amanda Gonzalez Thompson, a spokesperson for Toomey, told Yahoo Finance that the senator “would welcome a conversation after he receives the documents he requested.”

Quasi-government structure

Toomey’s letters to the reserve banks floated the possibility of new legislation that could more strictly apply federal public record-keeping laws to the reserve banks.

The challenge lies in the Federal Reserve System’s quasi-government structure; the Fed’s 12 reserve banks are not federal agencies and operate as independent entities not funded by Congressional appropriations.

However, those 12 outposts (with presidents who are not elected or confirmed by the Senate) report to a Board of Governors in Washington, D.C. (with governors who are confirmed by the Senate) that is an agency of the federal government.

This means that while the Fed Board is subject to federal disclosure laws like the Freedom of Information Act (FOIA), its reserve banks are not. A number of reserve banks have committed to “generally comply with the spirit of FOIA.”

Toomey may try to codify such a requirement through legislation, but nothing has been introduced so far.

The Pennsylvania Republican’s concerns over the Fed’s structure are a sidebar from his original inquiry into the Fed’s research on climate change and racial inequity, which he alleges is a breach of the central bank’s Congressionally-assigned mandates of stable prices and maximum employment.

San Francisco Fed President Mary Daly told Yahoo Finance in May that the bank “welcome[s] this kind of debate,” but posited that issues like climate change have the potential to impact the economy five to 10 years from now.

“Ultimately, we have to be a forward looking Federal Reserve, we have to do our work so that we understand the risks around us so that we can fully achieve the mandates we've been given by Congress,” Daly said on May 10.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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