By Michael S. Derby
(Reuters) – The Federal Reserve’s internal watchdog is opposing proposed legislation in the U.S. Senate that would overhaul the way the government is led.
Mark Bialek, Director of the Office of the Inspector General of the Federal Reserve System and the Bureau of Consumer Financial Protection, in a letter to Sen. Rick Scott, R-Fla. A bipartisan bill aimed at making his job as president and getting Senate confirmation won’t help the department do its job better, the letter said.
Bialek said ending the current arrangement in which the Fed chair selects the top job and feeds the decision into the political process “in no way strengthens our independence or our existing authority.” The letter was dated Wednesday The letter was announced publicly on Thursday.
Scott and Democratic Senator Elizabeth Warren co-sponsored a bill to change the way Fed IGs are selected and reviewed. The Fed’s IG has long faced criticism from some central bank watchers who fear it lacks the necessary independence to investigate problems at the U.S. central bank.
In the letter, Bialek argues that the IG has been effective in rooting out the problem, noting that the agency remains accountable to Congress, just like other government IGs. The letter marks the department’s work in investigating fraud related to government support programs related to the COVID-19 pandemic.
The IG also warned that subjecting its leadership to the political process “could also result in longer vacancies and difficulties attracting good candidates for the position.”
letter also noted that subjecting the Fed IG to a presidential appointment would cut pay for the position, meaning that the person holding the position would earn less than current employees in the department. Other government IGs have faced this type of salary increase arrangement, which “discourages experienced and high-quality candidates from seeking the position.”
The Fed’s IG has received the most attention in recent years for its investigations into the central bank Officials’ personal trading activities. It has yet to report market activity by regional Fed leaders, while Fed Chairman Jerome Powell and the central bank’s former vice chair Richard Clarida reckoned over their own trading concerns last July.
Responding to the letter on Twitter, Scott said seeing Fed IG “complain about my bad bills because it would shock him “Take a pay cut from the $350,000 he’s earning now. He said the letter was a “frenzied disapproval of the true accountability of the President-appointed IG.”
(This article has been corrected and the Republican Senator’s name changed from Tim in paragraph 2 For Rick)