H.R.2418 - Federal Reserve Regulatory Oversight Act (119th Congress)
Summary
H.R.2418, the Federal Reserve Regulatory Oversight Act, seeks to amend the Federal Reserve Act. The goal is to bring the non-monetary policy related functions of the Federal Reserve System's Board of Governors into the congressional appropriations process. This means that Congress would need to approve funding for these functions annually.
The bill defines 'monetary policy' and 'non-monetary policy related administrative costs' to clarify which activities would be subject to appropriation. It mandates that the Federal Reserve collect assessments and fees to offset the costs of the congressional appropriation.
The changes would apply to expenses paid and fees collected on or after October 1, 2025.
Expected Effects
If enacted, this bill would increase congressional oversight of the Federal Reserve's non-monetary activities. The Federal Reserve would be required to seek appropriations for these functions, potentially leading to greater scrutiny and control by Congress.
This could affect the Fed's operational independence in areas such as supervision and regulation of financial institutions. The need for annual appropriations could introduce political considerations into the Fed's administrative functions.
Potential Benefits
- Increased Accountability: Greater transparency and accountability of the Federal Reserve's non-monetary activities through the appropriations process.
- Congressional Oversight: Enhanced ability for Congress to oversee and influence the Fed's regulatory functions.
- Potential Cost Savings: Scrutiny during the appropriations process could lead to identification of inefficiencies and potential cost savings.
- Reduced Regulatory Burden: Could lead to a reduction in the regulatory burden on financial institutions if Congress chooses to allocate fewer resources to regulatory activities.
- More efficient use of taxpayer money: By forcing the Fed to justify its expenses to Congress, the bill could lead to a more efficient use of taxpayer money.
Most Benefited Areas:
Potential Disadvantages
- Reduced Independence: Potential erosion of the Federal Reserve's independence from political influence, which could affect its ability to effectively regulate the financial system.
- Increased Political Influence: The appropriations process could become politicized, with funding decisions influenced by political considerations rather than economic needs.
- Operational Inefficiency: The need for annual appropriations could create uncertainty and delays in funding, hindering the Fed's ability to respond quickly to emerging risks.
- Increased Complexity: The process of seeking and managing appropriations could add complexity and administrative burden to the Fed's operations.
- Potential for Underfunding: Risk that Congress may underfund essential regulatory functions, potentially weakening the Fed's ability to supervise and regulate financial institutions effectively.
Constitutional Alignment
The bill's attempt to bring the Federal Reserve's non-monetary functions under congressional appropriation aligns with Article I, Section 8 of the Constitution, which grants Congress the power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States. This implies congressional control over federal spending.
However, the degree to which this action might impinge on the Federal Reserve's operational independence could raise concerns about the separation of powers, although the Constitution does not explicitly define the scope of the Fed's independence. The bill does not appear to violate any specific constitutional provision, but its practical application could be subject to legal challenges based on separation of powers principles.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).