Senate Duo Takes Aim at Fed's Lending Powers

        By David Harrison
        A bipartisan Senate duo is taking aim at the Federal Reserve's ability to make emergency loans to financial institutions.
        Sens. David Vitter (R., La.) and Elizabeth Warren (D., Mass.) introduced legislation Wednesday that would restrict the central bank's ability to intervene in the event of a financial crisis without congressional approval.
        The bill would require any Fed emergency-lending effort be open to at least five or more institutions. Loans would have to be set at five percentage points above similar Treasury securities. Those requirements could be waived by a vote of Congress. Fed lending programs that waive those requirements, however, would expire within 30 days if Congress doesn't approve them.
        The bill also restricts lending only to those institutions that aren't insolvent. The Fed and other relevant banking regulators would have to analyze institutions' assets and liabilities over the past four months and provide a written explanation before issuing the loans.
        Overall, the measure ensures that lawmakers would get a say on expansive central bank rescue programs such as those the Fed put in place during the 2008 financial crisis.
        Mr. Vitter and Ms. Warren have criticized the Fed's efforts during the crisis, writing to the central bank in an August letter that was signed by 15 lawmakers that its interventions were "a bailout in all but name."
        A Fed spokesman declined to comment.. But earlier this year, Fed governor Jay Powell said in a speech, "Further restricting or eliminating the Fed's emergency lending authority will not prevent future crises, but it will hinder the Fed's ability to limit the harm from those crises for families and businesses."
        The Fed is under orders by the 2010 Dodd-Frank law to restrict the kind of emergency-lending powers it exercised during the financial crisis. But senators have been largely unhappy with the Fed's December 2013 proposal.
        Mr. Vitter and Ms. Warrant represent the right and left wings of their respective caucuses but have come together in their criticism of big banks.
        "If another financial crisis happened tomorrow--and that's still a real risk--nobody doubts that megabanks would be calling on the federal government to bail them out again," Mr. Vitter said in a statement.
        The bill comes a day after Senate Banking Committee Chairman Richard Shelby (R., Ala.) unveiled a draft bill to increase congressional and outside oversight of the Fed board.
        It has encountered opposition among Democrats.
        Related reading:
        Greg Ip: Missing in Financial Rules Debate: Hard Numbers
        Democrats Greet Shelby Banking Bill With Skepticism
        Sen. Shelby to Unveil Legislation Heightening Fed Scrutiny
        Powell: Congressional Proposals to Audit the Fed 'Misguided'
        (END) Dow Jones Newswires

        May 13, 2015 17:01 ET (21:01 GMT)

#FX
#Forex
#SaleForex
#SenateDuo
#FedsRate
#FedsDecision
#LendingPowers