House Republicans are demanding that the Federal Reserve wait for the Senate to confirm a Federal banking regulator before proposing or adopting any new rules. According to a report by Politico, if the Fed does not comply, the GOP may move to block the regulations. The Congressional Review Act allows Congress to block regulations with majority votes and the backing of the president.
In a letter sent to Fed Chair Janet Yellen, House Financial Services Chairman Jeb Hensarling and 33 other Republican lawmakers said they were willing to use the Congressional Review Act to overturn Fed regulations if the central bank did not comply with their demands to pause rulemaking.
President Donald Trump has yet to nominate someone to serve as vice chairman of banking supervision, a position that has not been filled since its creation in the 2010 Dodd-Frank law.
In the absence of anyone to fill that job, Fed Governor Daniel Tarullo, an Obama administration appointee, has led efforts to strengthen oversight of the banking industry in the wake of the 2008 financial crisis.
During Yellen's testimony last week before Hensarling's committee, she said there was one possible rule that the Fed might take up related to stress tests that the biggest banks are required to undergo. She said the new Fed vice chairman would have a chance to review it.
The lawmakers wrote that if the Fed adopts or proposes rules before the vice chair is confirmed, "we will work with our colleagues to ensure that Congress scrutinizes the Federal Reserve's actions and, if appropriate, overturn them."
According to Bloomberg, Republicans and the Trump administration say Dodd-Frank and other financial rules have stifled economic growth and harmed consumers. Trump, who has called the law a “disaster,” signed an executive order earlier this month instructing the Treasury Department to examine financial rules and on Friday signed an additional order that will require department and agency heads to designate a “regulatory reform officer” to oversee the implementation of regulations and identify needed changes.
Earlier, other Republicans, including Patrick McHenry, from North Carolina, and Senator Pat Toomey, from Pennsylvania, called for Yellen to curtail various Fed activities until Trump nominees are in place.
In his letter, Hensarling of Texas referred to possible rules related to stress tests for banks that Yellen mentioned when she testified before the House earlier this month. Hensarling said that the Fed should halt rulemaking "absent an emergency," according to the letter. The stress tests are used to determine the current financial strength of a banking institution.
The Fed has received Republicans’ letter and has no further comment, said Eric Kollig, a spokesman.