Warren and Cummings Call on Fed to Require Board of Governors to Approve Major Enforcement Actions
"We respectfully request that the Fed revisit its existing delegation rules and require that the Board retain greater authority over the Fed's enforcement and supervisory activities in the future," Warren and Cummings wrote. "It is our recommendation that, at a minimum, a formal vote of the Board be required before the Fed can enter into consent orders that equal or exceed
Board Members rarely vote on the Fed's supervisory and enforcement decisions. Under current rules, consent orders are routinely entered into by staff without ever receiving a vote of the Board.
Last year, for example, the Fed staff entered into amended consent orders with 13 mortgage servicers accused of illegal foreclosure practices-one of the largest and most significant enforcement actions in the Fed's history-but Board Members did not formally review or approve the settlement. These consent orders came under significant criticism because their methodology allows mortgage servicers to receive
"We have learned the hard way that the task of monetary policymaking is made significantly more difficult when prudential regulators fail to ensure the safety and soundness of all facets of the banking system," Warren and Cummings wrote. "We believe that 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."
In addition to requiring a vote of the Board before the Fed enter into major consent orders, Warren and Cummings recommended that all Board Members:
. be notified through a formal process before staff members enter into all other consent orders;
. be provided with the designated staffing capacity necessary to review and analyze pending enforcement actions; and
. receive a copy of all letters sent to the Board Chair or a Board Member by a Committee or Member of
He wrote that, "of the nearly 1,000 formal, public enforcing actions the Federal Reserve has taken over the past 10 years, all but 11 were entered into by consent," and "ll of these consent actions were approved under delegated authority," meaning that they were not voted on by the
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