Federal Reserve Regulatory Oversight Act
- Bill Number
- H.R. 2418
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Finance and Financial Sector
- Status
- Introduced
- Latest Action
- 2025-03-27: Referred to the House Committee on Financial Services.
- Last Updated
- 2025-05-12T19:05:08Z
AI-Generated Summary
Purpose
The Federal Reserve Regulatory Oversight Act (H.R. 2418) aims to increase congressional oversight of the Federal Reserve System by requiring that the non-monetary policy functions of the Board of Governors—such as banking supervision and regulation—be funded through the annual federal appropriations process, rather than solely through the Fed's self-generated fees.
Key Provisions
- Appropriations Requirement: The Board of Governors and Federal Reserve Banks must collect assessments and fees to recover the costs of congressional appropriations for non-monetary policy administrative expenses. These entities can only spend on such costs if authorized by an appropriations act (a law passed by Congress to allocate federal funds).
- Offsetting Collections: Fees and assessments collected for a fiscal year must be deposited into a federal account as "offsetting collections" (funds that reduce the net cost to the government). No collections can occur without prior approval in an appropriations act.
- Scope Limitation: This applies only to non-monetary policy administrative costs, defined as:
- Direct expenses for supervising and regulating banks and other entities, including examinations, stress tests (simulated financial crisis scenarios), and communications about rules.
- Operating costs for related activities, such as staff training, research, data processing of reports from supervised institutions, and support expenses like overhead and pensions.
- Monetary Policy Definition: Monetary policy is defined as strategies to create a stable currency that supports economic activity by serving as a reliable measure of value and savings tool (excluding regulatory functions).
- Effective Date: Changes apply to expenses and fees starting October 1, 2025 (the start of the federal fiscal year).
Significant Changes to Existing Law
- The Federal Reserve Act is amended by adding a new section (11D) after section 11C.
- Previously, the Federal Reserve System operated with significant financial independence, funding most operations through assessments on member banks without direct congressional appropriations. This bill subjects non-monetary policy costs (about regulatory and supervisory work) to the appropriations process, while leaving core monetary policy functions (like setting interest rates) unaffected and independently funded.
Potential Impacts
- On Government Agencies: The Federal Reserve's Board of Governors will face new budgetary constraints and reporting requirements to Congress, potentially slowing decision-making on regulatory activities. Federal Reserve Banks may need to adjust fee structures to align with appropriated amounts.
- On Citizens: Indirect effects could include greater taxpayer accountability for Fed regulatory spending, as funds flow through the federal budget. It may lead to more transparent oversight of bank regulations, potentially influencing consumer protections or financial stability.
- On International Relations: Minimal direct impact, though changes to U.S. banking supervision could affect how foreign banks interact with the U.S. financial system, possibly influencing global regulatory coordination.
Main Stakeholders Affected
- Federal Reserve System: The Board of Governors and 12 regional Federal Reserve Banks, whose regulatory budgets will now require congressional approval.
- Congress: Gains direct control over funding for Fed oversight of banks, enhancing its role in financial policy.
- Financial Institutions: Banks and other entities supervised by the Fed (e.g., large commercial banks, credit unions), as funding changes could alter the pace or focus of examinations and rules.
- Taxpayers and the Public: Through increased congressional scrutiny of federal spending on financial regulation.
Notable Legal, Constitutional, or Political Implications
- Legal: Reinforces Congress's authority under the Appropriations Clause of the U.S. Constitution (Article I, Section 9), which gives Congress exclusive power over federal spending. It does not alter the Fed's independence in monetary policy but carves out regulatory functions for oversight.
- Constitutional: Balances the Fed's quasi-independent status (established to insulate monetary decisions from politics) with democratic accountability, potentially challenging the original intent of the Federal Reserve Act for full operational autonomy.
- Political: Could politicize bank regulation by tying it to annual budget debates, risking partisan influences on supervisory priorities. Critics might argue it undermines the Fed's expertise, while supporters see it as promoting fiscal responsibility and transparency. No direct challenges to existing laws like the Dodd-Frank Act (post-2008 financial reforms) are introduced.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. Davidson, Warren [R-OH-8]
Cosponsors (1)
Recent Actions
- 2025-03-27: Referred to the House Committee on Financial Services.
- 2025-03-27: Introduced in House
- 2025-03-27: Introduced in House
Bill Versions
- Federal Reserve Regulatory Oversight Act — issued 2025-03-27 — PDF (4 pages)