Republicans on the Senate Banking Committee boycotted a vote on Tuesday for a batch of five nominees to the Federal Reserve and one to the Federal Housing Finance Agency, denying the committee the quorum necessary to send the nominations to the full Senate.
In prepared remarks at the executive session, committee chairman Sherrod Brown (D-OH) said: “Republicans have walked out on the American people.” Democrats in attendance were similarly scornful of their colleagues’ absence.
Backed by a razor-thin majority in the Senate, the Biden administration has faced considerable obstacles in filling the ranks of its regulators. But even Kyrsten Sinema, a critical swing vote within that majority, said: “I'm hopeful we can cut through the partisan gridlock, stop the political bickering, and move these nominations forward.”
The planned walk-out attracted an unusual mob of reporters to the Banking Committee’s hearing on stablecoins earlier that day.
The move followed a month of back-and-forth barbs over the nominees, particularly Sarah Bloom Raskin. Bloom Raskin served as a Fed governor before becoming the deputy secretary of the Treasury during the Obama administration. Her nomination on January 14 initially drew fire from Republicans who suspected she would cut off politically controversial businesses, especially energy companies, from Fed crisis aid.
Subsequently, Bloom Raskin’s tenure at fintech firm Reserve Trust Company drew scrutiny. For a timeline, that firm first registered in 2016, was rejected for a Fed master account in June 2017, added Bloom Raskin to its board upon her departure from Treasury in 2017, and then received access to a Federal Reserve master account in 2018.
A master account with the Fed is effectively the most direct access to the US's money supply and interchange systems that a financial institution can have. Without it, fintechs are generally dependent on partner banks. For crypto firms, this has sometimes ended poorly, with some major firms getting cut off from fiat systems when their banks decide to stop banking them.
Toomey and Cynthia Lummis (R-WY) discovered a phone call that Bloom Raskin made to the Kansas City Fed in August 201 — a call that Bloom Raskin has by turns denied memory of or avoided questions on. In a statement on Bloom Raskin’s role at Reserve Trust, Lummis noted: “Two Wyoming-chartered banks have been trying to obtain Fed master accounts for over a year.”
Those two entities in limbo are Kraken and Avanti, crypto-native firms that, unlike Reserve Trust, possess banking charters. The question is also pressing for federally chartered crypto banks, as Brian Brooks, who helped pave the way for those charters while leading the Office of the Comptroller of the Currency, asked on Twitter last August:
Brooks joined the board of Protego on February 15. When initially reached for comment, the firm told The Block that “[Brooks] did not work on the application” for a national charter, but after initial publication clarified: "Brian was part of the process in reviewing Protego's application but had left the OCC by the time the company received conditional approval."
A Fed master account is an incredibly valuable asset, without which financial operators are dependent on partner banks. That master account is, consequently, the first thing that Reserve Trust advertises on its website, saying: “Move beyond the bank. Reserve Trust is the first fintech trust company with a Federal Reserve master account.”
The application process for a master account was in the spotlight last summer, as the Fed solicited comments on new guidance for the application process in light of "a recent uptick in novel charter types being authorized or considered across the country." Kraken, in its response to this comment, criticized the new proposal for privileging federal charters over those from state authorities.
While the Fed seems to be working on facilitating master accounts for "novel charter types," they have seemingly authorized none. Except to Reserve Trust.
According to Lummis and Toomey, Bloom Raskin sold her equity in Reserve Trust for $1.4 million in 2020. Republicans on the Banking Committee say their questions on the matter remain unanswered.
Speaking to press on February 15, Senator Brown said Toomey “sent almost 200 questions for her to respond to over a 48 hour period, which she did. Other letters then came in later. She responded to those. They don't much like the answers.”
The Fed’s board has several vacancies at the moment, while inflation has become a political hot potato. Consequently, both parties are keen to blame the other for obstructing the process of filling these positions.
“As far as Republicans on the committee are concerned, we are perfectly ready to proceed with votes on five of the six nominees,” Toomey said on the Senate floor later that evening. “Rather than advance five through the committee, Chairman Brown decided zero.”
At the same time, Republicans in the Senate have delayed the confirmation process for a number of other appointed positions. At least in part, this is because they anticipate a win in midterms that will flip the Senate in their favor. One notable example of a time-intensive nomination was Saule Omarova, Biden's pick to lead the Office of the Comptroller of the Currency, who withdrew under heavy pressure from Banking Committee Republicans.
Updated: 2/18/22: This article has been updated to include more information about Brian Brooks' work on Protego's national charter received after initial publication.
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