Warren Rebukes Weak Fed Ethics Rules, Inspector General for Contributing to Culture of Corruption by Failing to Hold Fed Officials Accountable
Weak Ethics Rules and Fed IG’s feckless investigations “contributed to the Fed’s culture of corruption and impunity”
Today at 2:30 PM, Warren Will Question Fed IG on Fed Accountability
Washington, D.C. – U.S. Senator Elizabeth Warren, Chair of the Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy, sent a letter to Mark Bialek,, Inspector General (IG) of the Federal Reserve (Fed), rebuking the IG for his failure to hold Fed Chair Powell and senior Fed officials accountable for major ethics breaches, and the IG’s sham investigation of the Fed trading scandal, both of which undermine his recommendations for strengthening the Fed’s disturbingly weak ethics rules. Senator Warren called out the Fed IG’s “irresolvable conflict of interest”: that he is chosen by the Fed Chair and can be removed by a vote of the Fed Board as one major reason for these failures, stressing the importance of her bipartisan bill that would require the Fed IG to be appointed by the President and confirmed by the Senate.
“In July 2022, your office released the findings of its investigation of trading activities by senior officials of the Federal Reserve Board of Governors… gaps in the review and your uncritical acceptance of explanations for clearly improper behavior render the findings of the Inspector General’s (IG) report simply not credible. And your failure to effectively carry out your duties as an ‘independent and objective oversight authority’ undermines the recommendations made in your April 2023 evaluation of the Fed’s personal investment and trading rules and conflict of interest monitoring processes,” wrote Senator Warren.
Senator Warren notes that the IG’s latest review of the Fed’s updated rules on investing and conflicts of interest - released in April 2023 - found that the Fed’s rules did not cover enough senior staff, were not strong enough, and were not effectively enforced – a “trifecta of failure.” Her letter noted that these weaknesses were in part due to the IG’s history of failing to hold Fed officials accountable for the stock trading scandals,
Senator Warren rebukes the Fed IG’s response to the numerous stock trading scandals by senior Fed officials, including findings that Fed Chair Powell’s trust engaged in improper trades and that then-Fed Vice Chair Clarida failed to report multiple trades made in 2019 and 2020. “Your response to these findings was feckless… Instead of insisting that powerful Federal Reserve leaders meet high ethics standards, you eagerly accepted their excuses for failure. You made no recommendations to hold Chair Powell and Clarida accountable for their improper trading and disclosure failures, and in doing so, contributed to the Fed’s culture of corruption and impunity,” wrote Senator Warren.
“Your failure to hold Chair Powell – at whose discretion you serve – accountable is the clearest possible example showing that your office lacks the tools necessary to effectively perform its important responsibilities as the Fed’s independent watchdog. That’s why I have introduced bipartisan legislation, S. 915, which would modify the Fed IG role to require that the IG be appointed by the President and confirmed by the Senate (the same structure in place at 30 federal agencies,” continued Senator Warren.
Senator Warren will question the Fed IG during the hearing of the Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Economic Policy place on Wednesday, March 17th at 2:30pm.
Senator Warren has led extensive oversight efforts to hold the Fed and Chair Powell accountable for ethics, supervision, and regulation failures:
- On May 3, 2023, Senator Warren and John Kennedy (R-La.) sent a letter to the Fed IG, inviting him to testify at their hearing on the Fed’s role overseeing Silicon Valley Bank (SVB) before its failure and to consider legislative reforms that strengthen transparency and accountability at the Fed.
- On April 28, 2023, following the Fed’s report on SVB’s failure, Senator Warren released a statement calling on the Fed to immediately adopt stricter bank oversight and called out Chair Powell’s failure to supervise and regulate banks that posed a systemic risk to the economy.
- On March 31, 2023, Senator Warren and Thom Tillis (R-N.C.) led a bipartisan group of senators to reintroduce the Financial Regulators Transparency Act, bipartisan legislation that would subject regional Federal Reserve Banks to the Freedom of Information Act (FOIA) and ensure their responsiveness to congressional and public information requests.
- On March 22, 2023, Senators Warren and Rick Scott (R-Fla.) introduced bipartisan legislation to require a presidentially-appointed and Senate-confirmed Inspector General to the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection.
- On March 22, 2023, Senator Warren led 11 senators in a letter to Fed’s Vice Chair for Supervision, Michael Barr, calling on him to exercise the Fed’s authority to apply stronger regulation and supervision to banks with assets totaling $100 to $250 billion.
- On March 16, 2023, Senator Warren sent a letter to Fed Chair Powell, criticizing his leadership failures at the Fed that directly contributed to the failures of SVB and Signature Bank, and the significant risk to the banking system and the economy unleashed by those collapses.
- On March 15, 2023, Senator Warren delivered a speech on the Senate Floor about the failures of SVB and Signature, spoke about her new legislation, the Secure Viable Banking Act, which would reverse the mistakes that Congress and President Trump made with rollbacks of Dodd-Frank protections.
- On March 14, 2023, Senator Warren called on Chair Powell to recuse himself from the Fed’s review of the SVB failure.
- In December 2022, Senator Warren and then-Senator Pat Toomey (R-Pa.) introduced the bipartisan Financial Regulators Transparency Act, legislation that would strengthen Federal Reserve accountability and ensure that no financial regulator can withhold critical ethics-related information from Congress.
- Senator Warren has previously sent letters to Chair Powell on November 7, 2022, August 11, 2022, January 10, 2022, December 7, 2021, and October 21, 2021, and requested that the Fed publicly release additional information about its trading scandal, but the Fed has failed to adequately respond.
- In October 2022, Senator Warren called out Atlanta Fed President Raphael Bostic for his “alarming failure” to disclose financial transactions, which speaks to “further evidence of the depth of the ethics problem at the Fed.”
- In February 2022, Senator Warren secured significant ethics commitments from several Fed Board nominees, including: Dr. Lael Brainard, nominee to serve as Vice Chair on the Federal Reserve Board, Sarah Bloom Raskin, nominee to serve as Vice Chair for Supervision on the Federal Reserve Board of Governors, and Drs. Lisa Cook and Philip Jefferson, nominees to serve as members of the Board of Governors. Bloom Raskin, Cook, and Jefferson agreed to a four year recusal period from matters which they oversee on the Board of Governors, not to seek a waiver from these recusals, and not to seek employment or compensation from financial services companies for four years after leaving government service. In May 2022, Senator Warren also secured these commitments from Michael Barr, who was ultimately confirmed as Fed Vice Chair for Supervision.
- In January 2022, Senator Warren called on Chair Powell to immediately release information related to Fed officials' trades and changes to the Fed’s ethics policy after new and troubling revelations about then-Vice Chair Richard Clarida’s trades in March 2020.
- As the ethics scandals involving top level Fed officials unfolded in September and October of 2021, Senator Warren called out the culture of corruption at the Fed and raised deep concerns over conflicts of interests that have undermined public confidence in the Federal Reserve System.
- In an October 2021 speech on the floor of the Senate, Senator Warren called out the culture of corruption among high-ranking Fed after recent reports of ethically questionable financial activity by high-ranking Fed officials, including then-Vice Chair Clarida and two regional Fed presidents.
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