U.S. Senator David Vitter (R-Louisiana), co-sponsor of legislation aimed at ending “too big to fail,” is calling out the Federal Reserve for what he perceives as a lack of transparency and accountability on the part of the central bank upon learning that Fed governor Lael Brainard made donations to Hillary Clinton’s presidential campaign.
Bloomberg, citing Federal Election Commission records, reported earlier this week that Brainard made three donations to Clinton’s campaign totaling $750 between November 2015 and January 2016. Brainard, a Fed Governor since 2014, has strong ties to the Clinton family since her husband, Kurt Campbell, was a top advisor to Clinton during her tenure as Secretary of State. The donations made by Brainard were within federal rules, though they have drawn criticism because they came during a time when the Fed is trying to make the case that monetary policy should be independent and non-partisan.
“If anyone had questions about the independence of the Federal Reserve, this makes it crystal clear they’re not,” Vitter said. “The Fed needs to be independent, transparent and accountable. But under its current structure, the Board of Governors doesn’t act with complete autonomy and succumbs to groupthink which has led to megabank bailouts and easy money policies. We recently made huge progress to improve the Federal Reserve by requiring that they have at least one member with Community banking experience; however, it is clear that more reform is vastly needed. My legislation, the Fed Accountability Act, would help fix the ‘too big to fail’ groupthink we’ve seen at the Fed.”
The Fed had no comment on Brainard's donations, but did say that “The rules for the Federal Reserve Board are the same as the rules that apply to the Executive Branch, and are based on the Hatch Act. Board members do not engage in partisan political activities, but, like all executive branch employees, may vote and may make campaign contributions. 'An employee may make a political contribution to a political party, political group, campaign committee of a candidate for public office in a partisan election and multicandidate political committee of a Federal labor or Federal employee organization.'”
The Hatch Act states that a federal employee may contribute to a partisan candidate, party, or organization, as long as they do not do so while on duty or in the federal workspace. The Act states that “an officer must be particularly vigilant in avoiding any appearance that his or her personal political views reflect the views of the Bank or the System” and what while an officer may participate in partisan politics as a voter, express a private opinion, or make a contribution, an officer “may not take an active role in partisan politics.”
For some time, lawmakers have been calling for more transparency from the Fed. In November, the House of Representatives passed the Federal Oversight Reform and Modernization (FORM) Act with bipartisan support by a vote of 241 to 185. The FORM Act requires the Fed to transparently communicate its monetary policy decisions to the American people by requiring the Fed to generate a monetary policy strategy of its own choosing, in order to provide the American people with more transparency about the factors that lead to the Fed’s monetary decisions. The Act would also allow the Government Accountability Office (GAO) to conduct an audit of the Fed anytime there is a policy change. The bill was sponsored by Rep. Bill Huizenga (R-Michigan), who is the House Monetary Policy and Trade Subcommittee Chairman.
The White House released a statement saying that if President Obama were presented with the bill, his senior advisors would recommend a veto.
Vitter, along with Sen. Elizabeth Warren (D-Massachusetts), both members of the Senate Banking Committee, introduced last May the Fed Accountability Act, which is aimed at improving the central bank’s decision-making process by increasing independence of the individual governors and brining transparency to votes on enforcement actions of more than $1 million. In 2013, Vitter and Sen. Sherrod Brown (D-Ohio) introduced bipartisan legislation that would end too big to fail; the bill called for institutions with more than $500 billion in assets, such as JPMorgan Chase, Bank of America, and Citi—to hold capital totaling 15 percent of their assets. Banks with $50 billion in assets would be required to hold capital equal to 8 percent of its assets.