Senator Elizabeth Warren of Massachusetts and Representative
Elijah Cummings of Maryland said in the letter to Fed Chair Janet
Yellen that the board only voted on 11 of about 1,000 enforcement
actions taken during the last 10 years. They cited a recent letter
they received from Yellen's predecessor, Ben Bernanke.
In fact, the pair said Fed employees sometimes reach enforcement
decisions without even needing approval from the agency's senior
staff, let alone the board.
"While the board votes on every important decision the Fed makes on
monetary policy, the board rarely votes on the Fed's important
supervisory and enforcement policy decisions," the lawmakers said in
The two have been particularly upset that top Fed officials did not
scrutinize a settlement with big mortgage servicers over foreclosure
abuses committed in 2009 and 2010. They viewed the settlement as too
Regulators initially ordered banks, including Bank of America and JPMorgan Chase, to conduct case-by-case reviews of loan files for
borrowers whose homes were seized.
After that process proved time-consuming and expensive, regulators
called off the reviews and instead settled with the banks.
Warren, who sits on the Senate Banking Committee, and Cummings, the
top Democrat on the House of Representatives Oversight Committee,
have been deeply critical of the settlement and have pushed
regulators to be more transparent about how such agreements are
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They expressed frustration when Fed Governor Daniel Tarullo said in
June that Fed staff consulted with board members on the settlement,
but the board did not vote to authorize it.
The Federal Reserve's policy for enforcement actions differs from
some other federal financial regulators. At the U.S. Securities and
Exchange Commission, enforcement actions must be approved by a
majority of the five-member panel.
In Tuesday's letter, the lawmakers asked Yellen, who took over as
Fed chair earlier this month, to revise the agency's policies to
require approval of big enforcement actions by the board members.
"We recommend that, at a minimum, a formal vote of the board be
required before the Fed can enter into consent orders that equal or
exceed $1 million or that include a requirement that a bank officer
be removed and/or new management installed," they said.
Warren and Cummings also said board members should be notified
before Fed staff enter into a consent order and should have
sufficient staff to review any pending actions.
(Reporting by Emily Stephenson and Margaret Chadbourn;
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