[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 3219 Introduced in Senate (IS)]

112th CONGRESS
  2d Session
                                S. 3219

To restrict conflicts of interest on the boards of directors of Federal 
                 reserve banks, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 22, 2012

 Mr. Sanders (for himself, Mrs. Boxer, and Mr. Begich) introduced the 
 following bill; which was read twice and referred to the Committee on 
                  Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
To restrict conflicts of interest on the boards of directors of Federal 
                 reserve banks, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal Reserve Independence Act''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) In October 2011, the Government Accountability Office 
        found the following:
                    (A) Allowing members of the banking industry to 
                both elect and serve on the boards of directors of 
                Federal reserve banks poses reputational risks to the 
                Federal Reserve System.
                    (B) Eighteen former and current members of the 
                boards of directors of Federal reserve banks were 
                affiliated with banks and companies that received 
                emergency loans from the Federal Reserve System during 
                the financial crisis.
                    (C) Many of the members of the boards of directors 
                of Federal reserve banks own stock or work directly for 
                banks that are supervised and regulated by the Federal 
                Reserve System. These board members oversee the 
                operations of the Federal reserve banks, including 
                salary and personnel decisions.
                    (D) Under current regulations, members of a board 
                of directors of a Federal reserve bank who are employed 
                by the banking industry or own stock in financial 
                institutions can participate in decisions involving how 
                much interest to charge to financial institutions 
                receiving loans from the Federal Reserve System, and 
                the approval or disapproval of Federal Reserve credit 
                to healthy banks and banks in ``hazardous'' condition.
                    (E) Twenty-one members of the boards of directors 
                of Federal reserve banks were involved in making 
                personnel decisions in the division of supervision and 
                regulation under the Federal Reserve System.
                    (F) The Federal Reserve System does not publicly 
                disclose when it grants a waiver to its conflict of 
                interest regulations.
            (2) Allowing currently employed banking industry executives 
        to serve as directors on the boards of directors of Federal 
        reserve banks is a clear conflict of interest that must be 
        eliminated.
            (3) No one who works for or invests in a firm receiving 
        direct financial assistance from the Federal Reserve System 
        should be allowed to sit on any board of directors of a Federal 
        reserve bank or be employed by the Federal Reserve System.

SEC. 3. END CONFLICTS OF INTEREST.

    (a) Class A Members.--The tenth undesignated paragraph of section 4 
of the Federal Reserve Act (12 U.S.C. 302) (relating to Class A) is 
amended by striking ``chosen by and be representative of the 
stockholding banks'' and inserting ``designated by the Board of 
Governors of the Federal Reserve System, from among persons who are not 
employed in any capacity by a stockholding bank''.
    (b) Class B.--The eleventh undesignated paragraph of section 4 of 
the Federal Reserve Act (12 U.S.C. 302) (relating to Class B) is 
amended by striking ``be elected'' and inserting ``be designated by the 
Board of Governors of the Federal Reserve System''.
    (c) Limitations on Boards of Directors.--The fourteenth and 
fifteenth undesignated paragraphs of section 4 of the Federal Reserve 
Act (12 U.S.C. 303) (relating to Class B and Class C, respectively) are 
amended to read as follows:
    ``No employee of a bank holding company or other entity regulated 
by the Board of Governors of the Federal Reserve System may serve on 
the board of directors of any Federal reserve bank.
    ``No employee of the Federal Reserve System or board member of a 
Federal reserve bank may own any stock or invest in any company that is 
regulated by the Board of Governors of the Federal Reserve System, 
without exception.''.

SEC. 4. REPORTS TO CONGRESS.

    The Comptroller General of the United States shall report annually 
to Congress beginning 1 year after the date of enactment of this Act to 
make sure that the provisions in this Act are followed.
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