Congressional watchdog to review Fed’s bank oversight

A congressional watchdog agency is preparing to examine whether the U. S. Federal Reserve has been lax in overseeing the banks it supervises.

The U. S. Government Accountability Office is planning the review in response to a request last fall from Reps. Maxine Waters, D- Calif., and Al Green, D- Texas, GAO spokesman Chuck Young said Friday.

Waters, the ranking Democrat on the House Financial Services Committee, and Green, the party’s top member on the House panel’s Oversight and Investigations subcommittee, asked GAO to conduct an “evaluation of regulatory capture” and focus on the New York Federal Reserve, Reuters reported.

Critics suggest that Fed officials may have become too friendly with bankers.

“The request was made in October, but the work is in the initial phases” involving the review’s scope and methodology, said Young, whose agency conducts reviews on behalf of Congress.

Representatives for Waters and Green did not immediately respond to messages seeking comment. Waters raised the issue during a November hearing.

“We will cooperate with the GAO,” said Fed spokesman Eric Kollig.

The New York Fed is the U. S. central bank’s first line of oversight on Wall Street financial institutions. The letter from Waters and Green raised concern about reports of a “revolving door” between the New York Fed and the banks it supervises, according to Reuters.

In November, the Fed said its review found “inconsistencies in documentation produced by supervisory teams” that oversee large banks, and “inconsistent practices” by regional Fed banks.