Sen. Pat Toomey accused a Federal Reserve president of improper “political lobbying” and cited it as an example of why regional Fed banks may need to be overhauled or eliminated.
Toomey, the top Republican on the Banking Committee, excoriated Federal Reserve Bank of Minneapolis President Neel Kashkari in a letter Monday for his attempts to garner public support for a state constitutional amendment that affirms the “fundamental right to a quality public education.”
Toomey said that Kashkari and other Fed officials had misused government resources in pushing for the change.
“These political lobbying efforts by you and other Minneapolis Fed officials, which the board of the Minneapolis Fed has shockingly endorsed, are well beyond the Federal Reserve’s mandate, violate Federal Reserve Bank policies, constitute a misuse of Minneapolis Fed resources, and ultimately undermine the Federal Reserve’s independence and credibility,” the Pennsylvania Republican told Kashkari.
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Toomey branded the proposed constitutional revision, dubbed the Page amendment, as “highly political” and said it intrudes on the partisan debate about whether public school systems are “preferable to parental choice in education.”
“It is also controversial because it could be used by liberals to challenge education spending levels in court and give activist judges grounds for overriding levels set by the state’s legislature, which is elected by and accountable to voters,” he added.
Toomey pointed out that the regional Fed bank created an entire webpage devoted to the Page amendment that includes links to research about educational disparities that the bank has undertaken.
A question-and-answer section about the proposed amendment on the Fed’s website asserts that it is “time to shift the paradigm in Minnesota” surrounding public education, and it stresses the need for a constitutional amendment to ensure children have a fundamental right to quality education.
Existing language in the state’s constitution merely says that it is the duty of the Legislature to establish an “adequate” and “uniform” system for public schools, which the regional Fed and Kashkari contend does not go far enough.
“Setting aside the merits of your proposal, these political lobbying efforts on the issue of K-12 education are well beyond the Federal Reserve’s mandate. Nowhere in the Federal Reserve’s governing statute is there a mention of education policy,” Toomey wrote.
Toomey’s letter to Kashkari is part of an investigation his office has taken into so-called “mission creep” at the Fed and its regional banks. He contends the regional banks may be exceeding the bounds of their nonpartisan mission and straying into the political realm, especially concerning topics such as climate change and racial justice.
A GOP aide told the Washington Examiner on Tuesday that the specific advocacy of the Page amendment from Kashkari is “extremely unusual.”
“I’m unaware of any prior example of a Fed official lobbying for a specific policy proposal like Mr. Kashkari has been doing with Minneapolis Fed resources for the past two years. This may be the most explicit and egregious example of Fed mission creep yet,” the aide said.
Kashkari himself is no stranger to the political realm. After serving in the Treasury Department under President George W. Bush, he unsuccessfully ran for governor of California as a Republican and lost to Democrat Jerry Brown in 2014.
Toomey noted in the letter that the Minnesota Fed’s code of conduct expressly prohibits Fed employees from engaging in political activity while using Fed resources or in association with the bank.
“The Federal Reserve Banks have a unique need to protect their independence from the political process. Therefore, although an employee may participate or become involved in issues of general public concern or debate, the employee’s association with the Bank must not be publicized in connection with any political activity,” the code reads. “Further, an employee may not engage in political activity while on duty or on Bank premises, and must be extremely cautious to avoid any suggestion of Bank sponsorship or support of such activities.”
Kashkari and the regional Fed’s advocacy of the Page amendment and its pursuit of a “highly politicized social agenda unrelated to monetary policy” highlights the need for the Fed to be reformed and more subject to congressional oversight, Toomey said.
Toomey mentioned three ideas for Fed reform at the tail end of the letter: making regional Fed banks subject to the Freedom of Information Act, subjecting regional Fed presidents to presidential appointment and congressional confirmation, and consolidating or eliminating the regional banks entirely.
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“To be clear, I do not present these ideas lightly. The Federal Reserve was given independence to insulate monetary policy from politics. Congress, however, has a responsibility to ensure that the Federal Reserve does not become a political actor,” Toomey concluded.
The Washington Examiner reached out to the Minneapolis Fed for comment. A spokesperson with the bank confirmed receipt of the letter and said that it is currently being reviewed.
