Sen. Bernie Sanders (I-Vt.) introduced legislation on Thursday to prohibit bank executives from serving on the boards of regional Federal Reserve banks tasked with supervising their firm.
Lawmakers have expressed outrage that former Silicon Valley Bank CEO Gregory Becker served on the board of directors at the San Francisco Federal Reserve, which failed to address the bank’s issues prior to its collapse.
“It is clear to me and to the American people, that the CEOs of the largest banks in America should not be allowed to serve as directors of the main agency we have in this country in charge of regulating those very same financial institutions,” Sanders said in a statement.
The Fed has 12 regional banks throughout the U.S., each of which responsible for administering different parts of the central bank’s activities. Each regional Fed bank has a president appointed by a board of directors, most of whom are usually local business executives.
Becker, who was a top proponent of a 2018 bipartisan bill to loosen regulations on midsize banks such as Silicon Valley Bank, resigned from the San Francisco Fed board after his bank went under.
Congress is ramping up investigations into the San Francisco Fed’s role in Silicon Valley Bank’s collapse, which prompted fears of contagion in the broader financial system. Republicans expect to bring San Francisco Fed President Mary Daly before Congress.
“The SF Fed had all of the resources and information necessary to properly supervise SVB, yet it spectacularly failed to do so,” Sen. Ted Cruz (R-Texas), the top Republican on the Senate Commerce Committee, wrote in a letter to Daly.
Federal Reserve Chairman Jerome Powell said Wednesday that he welcomes independent investigations into the Fed’s regulatory failures.
Sanders noted that five CEOs of banks with more than $150 billion in assets currently serve as directors for regional Fed banks, while two-thirds of regional Fed board directors are “hand-picked” by banks.
He pointed to a 2011 Government Accountability Office study finding that the banking industry’s central role in electing Fed board members creates “an appearance of a conflict of interest.”
“The Fed has got to become a more democratic institution that is responsive to the needs of working people and the middle class, not just CEOs of some of the largest financial institutions in America,” Sanders said.