Sen. Bernie Sanders, I-Vt., on Thursday introduced legislation to keep bank executives from serving as board members of the regional Federal Service Banks that supervise their companies, following the news that former Silicon Valley Bank CEO Gregory Becker had been on the board of the San Francisco Federal Reserve.
"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 Hill reported.
Sanders said there are five CEOs of banks who have more than $150 billion in assets who are serving as directors on regional Fed boards, with two-thirds of board directors being "hand-picked" by banks.
Sanders also noted a 2011 Government Accountability Office study showing an "appearance of a conflict of interest" taking place when the banking industry has a role in electing Fed board members.
"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.
The San Francisco Fed has come under fire from lawmakers for not addressing SVB's issues before it collapsed earlier this month. Becker resigned from the board after his bank went under, but was also a top proponent of a bipartisan bill in 2018 to loosen regulations on midsize banks.
There are 12 regional Fed banks nationwide, and each has a board of directors usually comprised of local business executives.
Republicans expect to bring in San Francisco Federal Reserve Bank President Mary Daly to testify before Congress as it investigates the local Fed's role in the Silicon Valley Bank collapse.
"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 member of the Senate Commerce Committee, wrote in a letter to Daly.
"Instead of fulfilling its statutory mandate to supervise SVB, the SF Fed has been distracted with engaging in politically-charged research and advocacy on environmental, social, and governance ('ESG') and diversity, equity, and inclusion ('DEI') topics, like global warming and racial justice," Cruz added.
Cruz is demanding that SVB and the San Francisco Fed answer several questions about SVB's "radical ESG agenda" and whether the bank "performed internal liquidity stress tests or received exemptions from such tests."
Federal Reserve Chair Jerome Powell said Wednesday that he welcomes independent investigations into the Federal Reserve Banks.
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