Should the Fed be Required to Give Congress Annual Updates on its Regulatory Activities? (H.R. 974)

What is H.R. 974?

(Updated April 21, 2019)

This bill — the Federal Reserve Supervision Testimony Clarification Act — would require the Chairman of the Federal Reserve (aka the Fed) or a designee to appear before the Senate Banking Committee and the House Financial Services Committee at annual hearings if the position of Vice Chairman for Supervision of the Federal Reserve is vacant. The topic of these hearings is the Fed’s efforts, activities, objectives, and plans with respect to the conduct of supervision and regulation of depository institution holding companies and other financial firms supervised by the Fed.

Argument in favor

The Federal Reserve needs to keep congressional committees updated about its regulatory activities. Someone from the Fed should provide testimony to that effect even if the position of vice chair for supervision isn’t filled.

Argument opposed

History shows that there’s no significant risk to forgoing these updates to Congress. There wasn’t a Vice Chairman for Supervision at the Fed during the Obama administration & committees can always ask the chair directly.

Impact

The Fed; Senate Committee on Banking, Housing, and Urban Affairs; House Committee on Financial Services; Vice Chairman for Supervision of the Fed; and the Fed Chairman.

Cost of H.R. 974

When this bill was introduced in the 115th Congress, the CBO estimated that implementing it wouldn’t significantly affect the Fed’s budget.

Additional Info

In-Depth: Rep. Josh Gottheimer (D-NJ) reintroduced this bill from the 115th Congress to require the Fed’s Vice Chairman to provide written testimony on board efforts regarding certain financial institutions’ supervision. Rep. Frank Lucas (R-OK), who introduced this bill in the 115th Congress, said the following in a floor speech introducing this bill to the full House after its unanimous passage out of the House Financial Services Committee:

“Congress gave the Federal Reserve much greater regulatory authority under Dodd-Frank. The bill established the Vice Chair for Supervision position to oversee those efforts. But the first confirmed appointee to that position took office only last year, a full 7 years since Dodd-Frank. During that time, Congress received minimal testimony on regulatory issues from the Fed. Typically, other officials who didn't oversee regulatory efforts gave testimony in this regard. But the key point is, Dodd-Frank requires only the Vice Chair for Supervision to give that testimony. While we are grateful that other Fed officials decided to speak to Congress on regulatory issues, they didn't have to under the law. My bill would prevent that situation from arising ever again. Under my bill, if there is no Vice Chair for Supervision, either the Fed Chair or their designee will be required to give annual testimony on regulatory matters… [T]his bill is about the oversight authority of Congress and the constituents we represent. It remains vitally important that we and our Senate friends hear from these agencies. Not only that, we should hear from the officials who are very knowledgeable on the issues in their areas, particularly when these regulations have a large effect on capital and money markets. Otherwise, our constituents will become even more distrustful of government. Transparency is key. In fact, it is one of our greatest responsibilities as Members of Congress. My bill promotes that responsibility, and, thus, deserves to be passed.”

This bill has one cosponsor, Rep. Frank Lucas (R-OK), in the current session of Congress. Last Congress, Rep. Lucas introduced this bill without any cosponsors, and it passed the full House but failed to receive a Senate committee vote.

Of Note: The Dodd-Frank Act established the position of Vice Chair for Supervision at the Fed’s Board of Governors. The Vice Chairman for Supervision is responsible for developing policy recommendations for the Fed on the supervision and regulation of depository institution holding companies and other financial firms supervised by the Fed. He or she is also responsible for overseeing the supervision and regulation of such firms.

Under current law, the Vice Chairman for Supervision of the Board of Governors of the Fed is required to appear before the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on FInancial Services at annual hearings. At these hearings, the Vice Chairman for Supervision is required to give a report regarding the Fed’s efforts, activities, objectives, and plans with respect to the conduct of supervision and regulation of depository institution holding companies and other financial firms supervised by the Fed. Currently, when the Vice Chairman for Supervision position is vacant, these hearings simply don’t happen.

The Obama administration failed to appoint a Vice Chairman for Supervision, so former Fed Governor Daniel Tarullo served as the de facto Vice Chairman for Supervision. However, since he wasn’t formally appointed as Vice Chairman for Supervision, Tarullo wasn’t required to attend the semi-annual Congressional hearings.

Media:

• Sponsoring Rep. Frank Lucas (R-OK) Floor Speech (115th Congress)
  
• CBO Cost Estimate (115th Congress)