Con­gres­sional watch­dog to re­view Fed’s bank over­sight

Chicago Sun-Times - - MONEY - Kevin McCoy and Paul David­son

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.

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