Elizabeth Warren and David Vitter are teaming up on a proposal to change the way the Federal Reserve works, the latest bipartisan effort between the two senators with very different ideological backgrounds.
Warren and Vitter on Thursday introduced legislation that would give every member of the Federal Reserve Board of governors a staff. Currently, only the chairwoman, Janet Yellen, has her own staff. The bill also would require public votes on fines for banks more than $1 million.
The two, both members of the Senate Banking Committee, also are planning to introduce a second bill that would limit the central bank’s ability to offer emergency loans to troubled banks.
Introducing the measure to allow each of the Fed’s governors a staff, Vitter said the Fed currently “succumbs to groupthink. If board members can think for themselves and are held accountable, taxpayers are less likely to be asked to bail out the megabanks.”
Vitter, who represents Louisiana, has teamed up with the top Wall Street critic Warren before. In December, Vitter joined Warren’s effort to have a provision loosening a Dodd-Frank rule stripped out of a must-pass government funding bill. They failed then, but the episode is one of several that have elevated Warren’s profile among progressives.
Currently, the Fed’s board of governors has five members, including Yellen. Each governor votes on monetary policy decisions as well as regulatory actions. Some members are lawyers specializing in regulation by training, while others are academic economists. All must rely on the chairman’s staff for analysis.
The legislation is likely to be considered as part of a package being put together by Senate Banking Committee Chairman Richard Shelby of Alabama, a Republican. Shelby has not indicated what he will include in the deal.
Warren and Vitter also are seeking to further limit the Fed’s ability to bail out banks. Although a similar provision was included in the 2010 Dodd-Frank financial reform law, congressional critics have said that the rules written by the Fed did not go far enough to ensure that there will not be a replay of the bailouts of 2008.
