The Federal Reserve is pushing back against mounting criticism of the central bank, as those pushing for reforms ratchet up their attacks.
Fed officials have in recent weeks met in private with staffers from both parties, focusing primarily on the Senate, according to sources familiar with the meetings. Meanwhile, Chairwoman Janet Yellen and other Fed officials have publicly sounded off against a proposal championed by Sen. Rand PaulRandal (Rand) Howard PaulDemocrats fret as longshot candidates pull money, attention Journalist Dave Levinthal discusses 'uptick' in congressional stock trade violations McConnell vows GOP won't help raise debt ceiling in December after Schumer 'tantrum' MORE (R-K.Y.) that would give Congress more sway over the bank.
The uptick in outreach from the independent agency signals an effort to quell calls for significant changes at the Fed and assuage concerns that it has become too opaque and too cozy with Wall Street.
"It almost seems like they're running scared," said Vern McKinley, an attorney who advises governments on central banking policies. "It's beneath them to be doing this lobbying."
McKinley, who has done work with the Fed and the Treasury Department, called the Fed's political outreach efforts "surprising" and "unseemly."
A Fed official declined to comment.
Though subject to congressional oversight, the Federal Reserve is not beholden to Congress for funding and is empowered to move on policy decisions without approval from either Congress or the president.
The 2010 Dodd-Frank Wall Street reform law only added to the Fed’s jurisdiction, handing the bank new regulatory powers over financial institutions.
As a result, the Fed is attracting more political attacks, said one financial services industry insider who works with banks and is familiar with the Fed's outreach efforts.
"As Fed officials get deeper into the regulatory space, we are now starting to see them acting more like regulators,” the industry source said. "[They're] commenting on issues of concern beyond interest rates — that's new."
Brash criticism from Paul and others has brought upon the bank a level of scrutiny unseen since the 2008 economic crisis, when Fed officials pushed Congress to approve massive bank bailouts to prevent an even larger recession.
Outgoing Dallas Fed President Richard Fisher added to the calls for reform this month, urging a restructuring of the central bank that would shift more power to the regional bank presidents.
Paul's Audit the Fed legislation calls for increased congressional oversight of the bank. Fed officials have slammed the proposal, saying it would politicize the Fed and decrease its independence.
Yellen told reporters in December that she would "forcefully" fight against the proposal.
“Clearly the Federal Reserve fears the information that may be disclosed as part of an audit,” Paul spokesman Brian Darling said. “Maybe they fear that the revolving door between the Wall Street and the Federal Reserve will be exposed. Or maybe they worry about the revolving door between the Department of Treasury and the Fed."
Sources said the Fed’s Congressional Liaison Office had been focusing its outreach in the Senate, where Paul’s bill would need support from a handful of Democrats to pass.
Darling said the office has not contacted Paul’s office for a meeting.
“The Fed has been very active in the public domain in lobbying against the idea of an independent Federal Reserve audit and I have to assume they are reaching out to friends in the House and Senate to stop it,” he said.
Still, he said Paul expects a vote on the measure this year. If it doesn’t pass as a standalone bill, its language could be attached to other “must pass” legislation, potentially including a measure to raise the national debt ceiling.
Rep. Thomas Massie (R-Ky.) introduced a version of the legislation in the House, where similar proposals have passed overwhelmingly in recent years.
"They're worried and they're concentrating on the Senate because they believe that this water has already gone over the dam in the House of Representatives," Massie said.
He said the mounting political criticism against the Fed reflects leftover angst from the economic crisis.
"There’s still this sense — and I think it’s justified — among the public that this is an oligarchy that bears no resemblance to a democracy and that the Fed officials come from the industry that they are helping — Wall Street," Massie said.
At the same time, the bank has come under scrutiny from Democrats. Sen. Elizabeth WarrenElizabeth WarrenMisguided recusal rules lock valuable leaders out of the Pentagon Biden's soft touch with Manchin, Sinema frustrates Democrats Hillicon Valley — Presented by LookingGlass — Congress makes technology policy moves MORE (D-Mass.) and Rep. Elijiah Cummings (D-Md.) are demanding the Fed to disclose details surrounding the bank's investigation into a 2012 leak of sensitive, market-moving information.
Mark Calabria, a former Senate Banking Committee aide to Sen. Richard Shelby (R-Ala.), said that the increased clout of Paul and Warren — rising stars from their respective parties, with possible presidential ambitions — has contributed to Fed's political approach.
Paul held an Audit the Fed rally in Des Moines, Iowa, earlier this month and has used the issue to raise funds.
Calabria noted that Warren and progressive groups were instrumental in removing former Treasury Secretary Larry Summers from consideration for the Fed chairmanship.
"Warren and company fought for her," said Calabria, director of financial regulation studies at the Cato Institute. "So you could argue that Janet Yellen would not be chair if it weren't for progressives."
The Hill reported this week that Yellen and Warren met over lunch on Dec. 2. In January, she met with Senate Democrats on Capitol Hill.
Yellen has gotten a sympathetic ear from Senate progressives, with regard to Paul’s bill. Sen. Sherrod BrownSherrod Campbell BrownBuilding back better by investing in workers and communities US on track to miss debt payments as soon as Oct. 19: analysis On The Money — Presented by NRHC — Democrats cross the debt ceiling Rubicon MORE (D-Ohio), the top Democrat on Senate Banking, has come out against the proposal, which is also opposed by Warren.
"He does not see how this legislation will benefit working Americans, which he thinks should be a top priority of the Fed at this time," Brown spokeswoman Meghan Dubyak said in a statement to The Hill.
Yellen will testify for the first time before the new-GOP controlled Congress next week.
Further complicating the situation is a rocky relationship between the Fed and Shelby, who has signaled plans to convene a hearing on Paul’s bill.
Last year, he opposed Yellen’s nomination to lead the central bank.
"It’s not just that the chairman of the Fed is perhaps the most powerful individual in the global economy — it’s that the institution itself is in utterly uncharted waters," Shelby said in a Senate floor speech opposing her confirmation.