By Michael S. Derby
(Reuters) – The Federal Reserve’s in-house watchdog agency is pushing back against proposed legislation in the U.S. Senate that would overhaul how the government department is led.
Mark Bialek, who heads the Office of the Inspector General of the Federal Reserve System and the Consumer Financial Protection Bureau, said in a letter to Senator Tim Scott, a Florida Republican, that a bipartisan bill to make his job a presidential appointment subject to Senate confirmation will not help the department do its job better.
Bialek said ending the current arrangement in which the head of the Fed chooses the person to fill that top job and moving the decision into the political process “would in no way enhance our independence or existing authorities.” The letter, dated Wednesday, was announced publicly on Thursday.
Scott and Democratic Senator Elizabeth Warren have co-sponsored the bill to change how the Fed IG is selected and vetted. The Fed’s IG has long faced criticism from some central bank watchers who fear it lacks the necessary independence to investigate trouble at the U.S. central bank.
In the letter, Bialek argued that the IG has been effective at rooting out problems, and noted that the agency remains accountable to Congress, like other government IGs. The letter flagged the department’s work in investigating fraud around government support programs tied to the COVID pandemic.
The IG also warned that making its leadership subject to the political process “could also lead to an extended vacancy and difficulty in attracting quality candidates for the position.”
The letter also noted that making the Fed IG subject to presidential appointment would cut pay for the job, meaning the person in that position would earn less than the department’s current staff. This upside pay arrangement has been faced by other government IGs and it “deters experienced, high-quality candidates from seeking the position.”
The Fed’s IG has garnered the most attention in recent years for its investigations into central bank officials’ personal trading activities. It has yet to report on the market activities of regional Fed leaders, while it cleared Fed Chair Jerome Powell and the central bank’s former Vice Chair Richard Clarida over their own trading issues last July.
Responding to the letter on Twitter, Scott said it was “pretty shocking” to see the Fed IG “complain that my bill is bad because it would give him a pay cut from the $350,000 he makes right now.” He said the letter was an “insane objection to real accountability with a presidentially-appointed IG.”
(Reporting by Michael S. Derby; Editing by Paul Simao)
