By Peter Schroeder - 02/12/14 10:12 AM EST
Some Democrats want to see top Federal Reserve officials held more accountable when the central bank strikes sizable settlements with financial institutions.
Sen. Elizabeth Warren (D-Mass.) and Rep. Elijah Cummings (D-Md.) called on the Fed to require its board members to formally sign off on any enforcement action that results in more than a $1 million settlement.
In a letter sent Wednesday to Fed Chairwoman Janet Yellen, the two criticized the current Fed practice of letting staff enter into these deals without a sign-off from top officials or only informal consultation.
The two pressed Yellen’s predecessor, Ben Bernanke on the same issue, and noted in their letter that he told them that the Fed board has only formally approved 11 out of roughly 1,000 enforcement actions in the last decade.
“While the Board votes on every important decision the Fed makes on monetary policy, the Board rarely votes on the Fed’s important supervisory and enforcement policy decisions,” they wrote.
The pair urged Yellen to make a change to Fed rules to require formal approval from top officials a “top priority” as she takes over the economic institution.
They noted that the Fed did not formally review its most notable settlement in years, the broad multibillion dollar settlement with several major mortgage servicers.
“We have learned the hard way that the task of monetary policymaking is significantly more difficult when prudential regulators fail to ensure the safety and soundness of all facets of the banking system,” they wrote.