Newspaper article International New York Times

2 Senators Urge Fed to Vote on Enforcement Actions ; Decisions to Crack Down Shouldn't Be Delegated to Staff Members, They Say

Newspaper article International New York Times

2 Senators Urge Fed to Vote on Enforcement Actions ; Decisions to Crack Down Shouldn't Be Delegated to Staff Members, They Say

Article excerpt

Two Democrats are recommending that the Fed's board of governors formally vote on significant enforcement actions rather than delegating authority to its staff.

Two prominent members of Congress, troubled by an enforcement action that the Federal Reserve imposed on large banks, are pressing for a change in the way the Fed approves its crackdowns.

The lawmakers, Senator Elizabeth Warren of Massachusetts and Representative Elijah E. Cummings of Maryland, both Democrats, are recommending that the Fed's board of governors formally vote on significant enforcement actions. They made this request in a letter sent on Tuesday to Janet L. Yellen, the new chairwoman of the Fed.

The Fed's board, made up of seven officials, rarely votes on supervisory actions. Instead, it usually delegates this authority to the Fed's in-house staff. Ms. Warren and Mr. Cummings appear to believe that a board vote could increase the oversight of enforcement actions and create more accountability when problems arise with such actions.

Last year, substantial flaws emerged in a $9.3 billion settlement that the Fed and the Office of the Comptroller of the Currency struck with 13 financial firms over allegations that they mishandled foreclosures during the housing bust. A government report later criticized the way that regulators had designed the foreclosure review and the consultants who carried it out.

Mr. Cummings, Democrat of Maryland, is recommending that the Fed's board of governors formally vote on crackdowns.

Ms. Warren and Mr. Cummings cited the foreclosure review in their letter to Ms. Yellen. "The board's lack of direct involvement in the mortgage servicer enforcement action is particularly noteworthy given certain troubling aspects of the settlement," they wrote.

"We have received the letter and plan to respond," Barbara Hagenbaugh, a Fed spokeswoman, said in an email.

Ms. Yellen, who testified in the House on Tuesday and was scheduled to testify in the Senate on Thursday, has extensive experience in conducting monetary policy. …

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