U.S. Rep. French Hill (R-AR) introduced legislation that would prohibit the Federal Reserve from transferring money to the Consumer Financial Protection Bureau (CFPB) if the Fed incurs a loss on its balance sheet.
The Federal Reserve Loss Transparency Act (H.R.8918) would also require the Fed to calculate its net earnings in accordance with U.S. generally accepted accounting principles (GAAP). Minutes of the Federal Reserve’s July Federal Open Market Committee meeting suggest the Fed’s net income would likely turn negative in the coming months.
Unlike most federal agencies, the CFPB is funded by the Federal Reserve, not through appropriations by Congress.
“This legislation is about restoring transparency and good governance at the Consumer Financial Protection Bureau (CFPB) and the Federal Reserve (the Fed). At a time when the central bank is carrying hundreds of billions of dollars in unrealized losses on its assets that could swing to an operating loss soon, it is grossly irresponsible for the Fed to be funding the Bureau’s radical and highly politicized agenda. This underscores why the CFPB should be funded through congressional appropriations like most federal agencies,” Hill said. “We believe the central bank should follow sound accounting practices like all other American businesses do. That is why our legislation will require the Fed to follow U.S. generally accepted accounting principles, instead of allowing our central bank to set its own accounting standards.”
Sen. Bill Hagerty (R-TN) introduced a similar bill, S. 4889, in the U.S. Senate.
“I’m pleased to introduce this legislation with Representative Hill that provides much-needed transparency and accountability at the Federal Reserve and CFPB,” Hagerty said. “The public’s trust in our nation’s central bank is of paramount importance, and accounting gimmicks and backdoor transfers do nothing but erode that trust. The fact that the Federal Reserve can continue to send hundreds of millions of dollars to the CFPB—outside of the appropriations process—even when the Federal Reserve incurs significant losses should unnerve all Americans. This couldn’t happen in the real world and shouldn’t be allowed to happen at the Fed.”