February 12, 2014

Bloomberg: Senate’s Warren Pushes to Require Board Votes on Banks

By Cheyenne Hopkins

February 12, 2014

The Federal Reserve should revise enforcement policy to require board-member votes on penalties exceeding $1 million or force changes in banks' management, two lawmakers wrote in a letter to Fed Chairman Janet Yellen.

Senator Elizabeth Warren and Representative Elijah Cummings, both Democrats, urged Yellen to make the change to bolster the Fed's accountability and to protect taxpayers against the kind of financial-industry risk-taking that helped fuel the 2008 credit crisis.

"We have learned the hard way that the task of monetary policy making is made significantly more difficult when prudential regulators fail to ensure the safety and soundness of all facets of the banking system," Warren of Massachusetts and Cummings of Maryland wrote in the letter dated yesterday. "Increasing the Board's direct role in overseeing enforcement and supervision would strengthen the Fed's efforts to reduce systemic risk in our financial system."

The letter from the two lawmakers came as Yellen testified at a House Financial Services Committee hearing to deliver her first report to Congress since replacing Ben S. Bernanke as Fed chairman last month. Yellen, 67, faced questions from House lawmakers on financial-regulation issues including whether the 2010 Dodd-Frank Act went far enough in protecting the economy.

Warren and Cummings said the Fed should hold a formal vote of the Board of Governors before entering into any enforcement order that is for $1 million or more or include a requirement that a bank officer be removed, new management be installed or both. The proposal is likely to be addressed when Yellen appears tomorrow before the Senate Banking Committee, which includes Warren.

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