Strengthening Federal Reserve System Accountability Act of 2023

II 118TH CONGRESS 1ST SESSION S. 1663 To amend the Federal Reserve Act to limit banker representation on boards of directors of Federal Reserve banks, and for other purposes. IN THE SENATE OF THE UNITED STATES MAY 17, 2023 Ms. WARREN (for herself and Mr. SCOTT of Florida) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To amend the Federal Reserve Act to limit banker represen- tation on boards of directors of Federal Reserve banks, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Strengthening Federal 4 Reserve System Accountability Act of 2023’’. 5 SEC. 2. BANKER REPRESENTATION ON FEDERAL RESERVE 6 BANK BOARDS. 7 (a) CLASS A DIRECTORS.— 8 VerDate Sep 11 2014 00:53 May 31, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1663.IS S1663 kjohnson on DSK79L0C42PROD with BILLS 2 •S 1663 IS (1) ELIGIBILITY.—The tenth undesignated 1 paragraph of section 4 of the Federal Reserve Act 2 (12 U.S.C. 302) is amended— 3 (A) by inserting ‘‘with $50,000,000,000 or 4 less in assets’’ before the period at the end; and 5 (B) by inserting ‘‘The Reserve bank, in 6 consultation with the Board of Governors of the 7 Federal Reserve System, may remove a Class A 8 director if, after the director is elected, the as- 9 sets of the bank of the director grow rapidly 10 greater than $50,000,000,000. No individual 11 may serve as a Class A director if the individual 12 represents a bank that has a CAMELS rating 13 of 3 or higher or outstanding Matters Requir- 14 ing Attention or Matters Requiring Immediate 15 Attention above the average number for banks 16 of similar size and complexity.’’ after the period 17 at the end. 18 (2) NOMINATION AND ELECTION.—The 16th 19 undesignated paragraph of section 4 of the Federal 20 Reserve Act (12 U.S.C. 304) is amended— 21 (A) in the third sentence, by inserting 22 ‘‘with $50,000,000,000 or less in assets’’ after 23 ‘‘member bank’’; and 24 VerDate Sep 11 2014 00:53 May 31, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1663.IS S1663 kjohnson on DSK79L0C42PROD with BILLS 3 •S 1663 IS (B) by striking the first and second sen- 1 tences. 2 (b) ELECTION OF CLASS B DIRECTORS.— 3 (1) IN GENERAL.—The 11th undesignated 4 paragraph of section 4 of the Federal Reserve Act 5 (12 U.S.C. 302) is amended by striking ‘‘three mem- 6 bers,’’ and all that follows through the period at the 7 end and inserting ‘‘6 members who shall be des- 8 ignated by the Board of Governors of the Federal 9 Reserve System. They shall be elected to represent 10 the public, without discrimination on the basis of 11 race, creed, color, sex, or national origin, and with 12 due but not exclusive consideration to the interests 13 of agriculture, commerce, industry, services, labor, 14 and consumers. When the necessary subscriptions to 15 the capital stock have been obtained for the organi- 16 zation of any Federal reserve bank, the Board of 17 Governors of the Federal Reserve System shall ap- 18 point the class B directors and shall designate one 19 of such directors as chairman of the board to be se- 20 lected. Pending the designation of such chairman, 21 the organization committee shall exercise the powers 22 and duties appertaining to the office of chairman in 23 the organization of such Federal reserve bank.’’. 24 VerDate Sep 11 2014 00:53 May 31, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1663.IS S1663 kjohnson on DSK79L0C42PROD with BILLS 4 •S 1663 IS (2) TECHNICAL AND CONFORMING AMEND- 1 MENTS.— 2 (A) The 16th undesignated paragraph of 3 section 4 of the Federal Reserve Act (12 U.S.C. 4 304) is amended— 5 (i) in the first sentence, as redesig- 6 nated by subsection (a)(2)(B) of this sec- 7 tion, by striking ‘‘and one candidate for di- 8 rector of Class B’’; and 9 (ii) in the third sentence, as redesig- 10 nated by subsection (a)(2)(B) of this sec- 11 tion, by striking ‘‘and Class B’’. 12 (B) Section 4 of the Federal Reserve Act 13 is amended— 14 (i) in the fifth paragraph of the fourth 15 undesignated paragraph, by striking ‘‘and 16 Class C’’; 17 (ii) by striking the 12th undesignated 18 paragraph; 19 (iii) by striking the 15th undesignated 20 paragraph (12 U.S.C. 303); 21 (iv) by striking the 17th undesignated 22 paragraph (12 U.S.C. 304); and 23 (v) by striking the 20th undesignated 24 paragraph. 25 VerDate Sep 11 2014 00:53 May 31, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1663.IS S1663 kjohnson on DSK79L0C42PROD with BILLS 5 •S 1663 IS (c) FINANCIAL INSTITUTIONS REGULATED BY THE 1 BOARD OF GOVERNORS.—Section 4 of the Federal Re- 2 serve Act is amended— 3 (1) in the 14th undesignated paragraph (12 4 U.S.C. 303), by striking ‘‘No director of class B 5 shall be an officer, director, or employee of any 6 bank.’’ and inserting ‘‘No individual who served as 7 an officer, director, or employee of any bank or 8 other financial institution regulated by the Board of 9 Governors of the Federal Reserve System during the 10 preceding 5-year period shall serve as a director of 11 class B.’’; and 12 (2) by striking the 15th undesignated para- 13 graph (12 U.S.C. 303). 14 SEC. 3. RESERVE BANK DIRECTOR RESPONSIBILITIES. 15 (a) IN GENERAL.—The eighth undesignated para- 16 graph of section 4 of the Federal Reserve Act (12 U.S.C. 17 301) is amended by inserting after the period at the end 18 of the second sentence the following: ‘‘The board of direc- 19 tors may not be involved in bank examinations or super- 20 visory processes, including the selection, appointment, and 21 compensation of all Federal reserve bank officers whose 22 primary duties involve supervisory matters, budgetary 23 matters, and any other decisions or deliberations that per- 24 tain to supervisory activities.’’. 25 VerDate Sep 11 2014 00:53 May 31, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1663.IS S1663 kjohnson on DSK79L0C42PROD with BILLS 6 •S 1663 IS (b) TERM LIMITS.—The 24th undesignated para- 1 graph of section 4 of the Federal Reserve Act (12 U.S.C. 2 308) is amended by inserting ‘‘No director of a Federal 3 reserve bank may serve more than 2 full terms.’’ after the 4 period at the end of the second sentence. 5 SEC. 4. FEDERAL RESERVE TRANSPARENCY AND INDE- 6 PENDENCE. 7 (a) DIRECTOR ELECTIONS.— 8 (1) CLASS A.—The 19th undesignated para- 9 graph of section 4 of the Federal Reserve Act (12 10 U.S.C. 304) is amended by inserting ‘‘, which shall 11 be published on the website of each Federal reserve 12 bank not later than 3 years after such declaration’’ 13 before the period at the end of the fifth sentence. 14 (2) CLASS B.—The 11th undesignated para- 15 graph of section 4 of the Federal Reserve Act (12 16 U.S.C. 302) is amended by inserting ‘‘The list of the 17 final 3 candidates considered for such designation 18 shall be published on the website of the Board of 19 Governors of the Federal Reserve System not earlier 20 than 3 years after the date of its completion.’’ after 21 the period at the end of the second sentence. 22 (b) DIRECTOR AND PRESIDENT SELECTION 23 INPUT.—Section 4 of the Federal Reserve Act is amended 24 VerDate Sep 11 2014 00:53 May 31, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1663.IS S1663 kjohnson on DSK79L0C42PROD with BILLS 7 •S 1663 IS by inserting after the 20th undesignated paragraph (12 1 U.S.C. 305) the following: 2 ‘‘The Federal reserve banks and the Board of Gov- 3 ernors of the Federal Reserve System shall develop proc- 4 esses for allowing public comment and input for nomi- 5 nating Class A directors and designating Class B direc- 6 tors, and appointing presidents. Each Federal reserve 7 bank shall publish a public contact for such nominations, 8 designations, and appointments. The Board of Governors 9 of the Federal Reserve System shall disclose any vote or 10 veto by a member of the Board for a Class B director 11 or a president not later than 3 years after such vote or 12 veto. The Board of Governors of the Federal Reserve Sys- 13 tem shall release a public statement after the date on 14 which a president is selected describing the involvement 15 of the Board in the selection process.’’. 16 (c) OFFICE STAFF FOR MEMBERS OF THE BOARD 17 OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.— 18 Section 11(l) of the Federal Reserve Act (12 U.S.C. 19 248(l)) is amended by inserting ‘‘Of amounts made avail- 20 able for staff of the Federal Reserve System, each member 21 of the Board of Governors may employ not more than 4 22 individuals for the purpose of staffing the member’s office, 23 with such individuals selected by such member and the sal- 24 VerDate Sep 11 2014 00:53 May 31, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1663.IS S1663 kjohnson on DSK79L0C42PROD with BILLS 8 •S 1663 IS aries of such individuals set by such member.’’ after the 1 period at the end. 2 (d) VOTE BY BOARD OF GOVERNORS ON CERTAIN 3 SETTLEMENTS.—Section 10 of the Federal Reserve Act 4 is amended— 5 (1) by redesignating paragraph (12) (12 U.S.C. 6 247b) as paragraph (11); and 7 (2) by adding at the end the following: 8 ‘‘(12)(A) The Board of Governors of the Fed- 9 eral Reserve System shall vote, at a properly noticed 10 public meeting of the Board, on whether to resolve 11 any enforcement action if the resolution of that ac- 12 tion involves the payment of not less than 13 $5,000,000 in compensation, penalties, or fines, or 14 other payments. 15 ‘‘(B) The results of the vote of each member of 16 the Board under subparagraph (A) shall— 17 ‘‘(i) be included at the appropriate place in 18 the official minutes of the Board; and 19 ‘‘(ii) be made publicly available on the 20 website of the Board.’’. 21 (e) TERM LIMITS; REVIEW.—The fifth paragraph of 22 the fourth unenumerated paragraph of section 4 of the 23 Federal Reserve Act (12 U.S.C. 341) is amended by in- 24 serting ‘‘A president may continue to serve after the expi- 25 VerDate Sep 11 2014 00:53 May 31, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1663.IS S1663 kjohnson on DSK79L0C42PROD with BILLS 9 •S 1663 IS ration of the term of office to which the president was 1 appointed until the earlier of the date on which a successor 2 has been appointed and qualified, the date on which the 3 next session of Congress subsequent to the expiration of 4 such term expires, or the date on which the President of 5 the United States removes the president. No appointed 6 president shall serve more than a total of 10 years, not 7 including any such continuation in service. The Board of 8 Governors of the Federal Reserve System, in consultation 9 with the relevant Reserve bank board of directors, shall 10 initiate a review of the Reserve bank president and vice 11 President and the appropriateness of their removal in the 12 event of a bank failure in the Reserve district. The Board 13 of Governors shall also publish the results of the review 14 not later than 90 days following the bank failure.’’ after 15 the period at the end of the fourth sentence. 16 SEC. 5. FEDERAL RESERVE ETHICS. 17 Section 4 of the Federal Reserve Act, as amended 18 by section 4(b) of this Act, is amended by adding at the 19 end the following: 20 ‘‘Each director, president, and vice president shall 21 comply with the same rules for investment and trading 22 activity prescribed by the Board of Governors of the Fed- 23 eral Reserve System. Each director shall disclose any fi- 24 nancial interest in the same manner as presidents. Each 25 VerDate Sep 11 2014 00:53 May 31, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1663.IS S1663 kjohnson on DSK79L0C42PROD with BILLS 10 •S 1663 IS Federal reserve bank shall publicly disclose and explain 1 any rationale for waivers granted to directors from conflict 2 of interest rules. The Comptroller General of the United 3 States shall annually review conflict of interest rules of 4 the Federal reserve banks and the Board of Governors of 5 the Federal Reserve System and implementation of and 6 compliance with such rules.’’. 7 Æ VerDate Sep 11 2014 00:53 May 31, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6301 E:\BILLS\S1663.IS S1663 kjohnson on DSK79L0C42PROD with BILLS