Federal Reserve Reform Act of 2018
A BILL
To amend the Federal Reserve Act to increase monetary policy transparency and accountability and to make reforms to the Federal Reserve System, and for other purposes.
Sec. 2 Monetary policy transparency and accountability
Section 12A of the Federal Reserve Act (12 U.S.C. 263) is amended—
by redesignating subsections (b) and (c) as subsections (d) and (e), respectively; and
by inserting after subsection (a) the following new subsections:
“(b) Policy transparency
“(1) Monetary policy strategy
“(A) In general—The Committee shall annually establish exactly 1 monetary policy strategy, which shall serve as a non-technical public communication of the Committee’s consensus expectation for the conduct of monetary policy during that calendar year.
“(B) Requirements—Each monetary policy strategy of the Committee shall include the following:
“(i) A plain English description of how the Committee would adjust each of the following monetary policy instruments in reaction to changes in a small and well-defined set of publicly available economic indicators:
“(I) Short-term interest rate targets established by the Committee.
“(II) Open-market operations authorized under section 14.
“(III) Earnings on balances maintained at a Federal reserve bank by or on behalf of a depository institution under section 19(b)(12).
“(ii) An identification of 1 monetary policy instrument from the list in clause (i) that the Committee expects to use as the primary instrument for implementing the monetary policy strategy described under subparagraph (A).
“(2) Reference monetary policy rules—In addition to the monetary policy strategy required under paragraph (1), the Committee shall annually adopt at least 1 and not more than 3 reference monetary policy rules, each of which shall mathematically express how the primary monetary policy instrument identified under paragraph (1)(B)(ii) reacts to changes in a small and well-defined set of publicly available economic indicators.
“(3) Deviations—Nothing in this subsection shall be construed to prevent the Committee from setting short-term interest rate targets, conducting open-market operations, or paying earnings on balances pursuant to section 19(b)(12) in a manner that deviates from a monetary policy strategy or any reference monetary policy rules established under this subsection.
“(c) Testimony and reports of the Chairman—The Chairman shall, concurrent with each semi-annual hearing required under section 2B, submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Banking and Financial Services of the House of Representatives, containing—
“(1) a statement as to whether the monetary policy strategy established under subsection (b)(1) qualitatively differs from any of the reference monetary policy rules required under subsection (b)(2) and, if applicable, a full and non-technical explanation of any such difference;
“(2) a statement as to whether the Committee’s conduct of monetary policy since the previous report quantitatively differs from any reference monetary policy rule and, if applicable, a full and non-technical explanation of any such differences; and
“(3) a description of—
“(A) the circumstances under which the Committee’s monetary policy strategy may be amended from year to year; and
“(B) a full and non-technical explanation of any such actual amendment.”
Sec. 3 Independence from credit policy
Returning to a monetary policy balance sheet—
In general— Not later than 1 year after the date of the enactment of this Act—
the Board of Governors of the Federal Reserve System shall transfer to the Department of the Treasury all covered assets that are neither gold stock, Treasury currency, nor direct obligations of the United States, foreign central banks, or the International Monetary Fund; and
the Secretary of the Treasury shall transfer to the Federal reserve banks direct obligations of the United States of equivalent market value to such covered assets.
Covered assets defined— In this subsection, the term covered assets means all assets—
purchased through open-market operations by the Federal reserve banks; or
acquired through transactions under the following sections of the Federal Reserve Act (12 U.S.C. 221 et seq.):
Section 10A before the date of the enactment of this Act.
Section 10B.
Section 13.
Section 13A.
Section 24.
Open market asset purchases— Section 14(b) (12 U.S.C. 355) of the Federal Reserve Act (relating to “Purchase and sale of obligations of United States, States, counties, etc.”) is amended to read as follows:
“(b) To buy and sell in the open market, at home or abroad, under the direction and regulations of the Federal Open Market Committee, gold stock, Treasury currency, or direct obligations of the United States, foreign central banks, or the International Monetary Fund. Nothing in this subsection shall be construed to limit advances under section 10B, or discount loans under sections 13, 13A, or 24.”
Maintaining a monetary policy balance sheet—
Assets acquired under emergency lending— Section 13(3) of the Federal Reserve Act (12 U.S.C. 343(3)) is amended by adding at the end the following new subparagraph:
“(F) Not later than 1 year after a Federal reserve bank acquires any assets under this paragraph that are neither gold nor direct obligations of the United States, foreign central banks, or the International Monetary Fund—
“(i) the Board shall transfer such assets of the Federal reserve bank to the Department of the Treasury; and
“(ii) the Secretary of the Treasury shall transfer to the Federal reserve banks direct obligations of the United States of equivalent market value to the assets described in clause (i).”
Repeal of authority to provide emergency advances to groups of member banks— Section 10A of the Federal Reserve Act is repealed.
Assets acquired through advances to member banks— The second undesignated paragraph of subsection (a) of section 10B of the Federal Reserve Act is amended—
by inserting “not ” before “secured by mortgage loans”; and
by striking “lowest discount rate” and inserting “highest discount rate”.
Sec. 4 Congressional accountability for emergency lending programs
Section 13(3) of the Federal Reserve Act (12 U.S.C. 343(3)), as amended by section 3, is further amended—
in subparagraph (A)—
by inserting “that pose a threat to the financial stability of the United States” after “unusual and exigent circumstances”; and
by striking “the affirmative vote of not less than five members” and inserting “the prior approval of the Secretary of the Treasury and not less than 2/3 of the members of the Federal Open Market Committee”;
in subparagraph (B)—
by moving such subparagraph 4 ems to the left;
in clause (i), by inserting at the end the following:
“(I) a method for determining the sufficiency of the collateral required under this paragraph;
“(II) acceptable classes of collateral;
“(III) the amount of any discount on the value of the collateral that the Federal reserve banks will apply for purposes of calculating the sufficiency of collateral under this paragraph; and
“(IV) a method for obtaining independent appraisals of the value of collateral the Federal reserve banks receive.”
in clause (ii)—
by striking the second sentence; and
by inserting after the first sentence the following: “A borrower shall not be eligible to borrow from any emergency lending program or facility unless the Board and all Federal banking regulators with jurisdiction over the borrower certify that, at the time the borrower initially borrows under the program or facility, the borrower is not insolvent.”; and
by striking clause (iv);
by inserting “financial institution” before “participant” each place such term appears;
in subparagraph (D)(i), by inserting “financial institution” before “participants”; and
by adding at the end the following new subparagraphs:
“(G) Joint resolution of approval
“(i) In general—A program or facility created under subparagraph (A) shall terminate on the date that is 30 calendar days after the date on which Congress receives a report described in subparagraph (C) unless there is enacted into law a joint resolution approving the program or facility not later than 30 calendar days after the date on which the report is received. Any loan offered through the program or facility that is outstanding as of the date on which the program or facility is terminated shall be repaid in full not later than 30 calendar days after the date on which the program or facility is terminated.
“(ii) Contents of joint resolution—For the purpose of this subparagraph, the term joint resolution means only a joint resolution—
“(I) that is introduced not later than 3 calendar days after the date on which the report described in subparagraph (C) is received by Congress;
“(II) that does not have a preamble;
“(III) the title of which is as follows: “Joint resolution relating to the approval of a program or facility created by the Board of Governors of the Federal Reserve System”; and
“(IV) the matter after the resolving clause of which is as follows: “That Congress approves the program or facility created by the Board of Governors of the Federal Reserve System on __________.” (The blank space being appropriately filled in).
“(iii) Fast track consideration in House of Representatives
“(I) Reconvening—Upon receipt of a report under subparagraph (C), the Speaker, if the House would otherwise be adjourned, shall notify the Members of the House that, pursuant to this subparagraph, the House shall convene not later than the second calendar day after receipt of such report.
“(II) Reporting and discharge—Any committee of the House of Representatives to which a joint resolution is referred shall report it to the House not later than 5 calendar days after the date of receipt of the report described in subparagraph (C). If a committee fails to report the joint resolution within that period, the committee shall be discharged from further consideration of the joint resolution and the joint resolution shall be referred to the appropriate calendar.
“(III) Proceeding to consideration—After each committee authorized to consider a joint resolution reports it to the House or has been discharged from its consideration, it shall be in order, not later than the sixth day after Congress receives the report described in subparagraph (C), to move to proceed to consider the joint resolution in the House. All points of order against the motion are waived. Such a motion shall not be in order after the House has disposed of a motion to proceed on the joint resolution. The previous question shall be considered as ordered on the motion to its adoption without intervening motion. The motion shall not be debatable. A motion to reconsider the vote by which the motion is disposed of shall not be in order.
“(IV) Consideration—The joint resolution shall be considered as read. All points of order against the joint resolution and against its consideration are waived. The previous question shall be considered as ordered on the joint resolution to its passage without intervening motion except 2 hours of debate equally divided and controlled by the proponent and an opponent. A motion to reconsider the vote on passage of the joint resolution shall not be in order.
“(iv) Fast track consideration in Senate
“(I) Reconvening—Upon receipt of a report under subparagraph (C), if the Senate has adjourned or recessed for more than 2 days, the majority leader of the Senate, after consultation with the minority leader of the Senate, shall notify the Members of the Senate that, pursuant to this subparagraph, the Senate shall convene not later than the second calendar day after receipt of such report.
“(II) Placement on calendar—Upon introduction in the Senate, the joint resolution shall be placed immediately on the calendar.
“(III) Floor consideration
“(aa) In general—Notwithstanding Rule XXII of the Standing Rules of the Senate, it is in order at any time during the period beginning on the fourth day after the date on which Congress receives a report described in subparagraph (C) and ending on the sixth day after the date on which Congress receives the report (even though a previous motion to the same effect has been disagreed to) to move to proceed to the consideration of the joint resolution, and all points of order against the joint resolution (and against consideration of the joint resolution) are waived. The motion to proceed is not debatable. The motion is not subject to a motion to postpone. A motion to reconsider the vote by which the motion is agreed to or disagreed to shall not be in order. If a motion to proceed to the consideration of the resolution is agreed to, the joint resolution shall remain the unfinished business until disposed of.
“(bb) Debate—Debate on the joint resolution, and on all debatable motions and appeals in connection therewith, shall be limited to not more than 10 hours, which shall be divided equally between the majority and minority leaders or their designees. A motion further to limit debate is in order and not debatable. An amendment to, or a motion to postpone, or a motion to proceed to the consideration of other business, or a motion to recommit the joint resolution is not in order.
“(cc) Vote on passage—The vote on passage shall occur immediately following the conclusion of the debate on a joint resolution, and a single quorum call at the conclusion of the debate if requested in accordance with the rules of the Senate.
“(dd) Rulings of the chair on procedure—Appeals from the decisions of the Chair relating to the application of the rules of the Senate, as the case may be, to the procedure relating to a joint resolution shall be decided without debate.
“(v) Coordination with action by other House
“(I) In general—If, before the passage by one House of a joint resolution of that House, that House receives from the other House a joint resolution, then the following procedures shall apply:
“(aa) The joint resolution of the other House shall not be referred to a committee.
“(bb) With respect to a joint resolution of the House receiving the resolution—
“(AA) the procedure in that House shall be the same as if no joint resolution had been received from the other House; but
“(BB) the vote on passage shall be on the joint resolution of the other House.
“(II) Treatment of joint resolution of other House—If one House fails to introduce or consider a joint resolution under this section, the joint resolution of the other House shall be entitled to expedited floor procedures under this section.
“(III) Consideration after passage—If, following passage of the joint resolution in the Senate, the Senate then receives the companion measure from the House of Representatives, the companion measure shall not be debatable.
“(IV) Vetoes—If the President vetoes the joint resolution, the period beginning on the date the President vetoes the joint resolution and ending on the date the Congress receives the veto message with respect to the joint resolution shall be disregarded in computing the 30-calendar day period described in clause (i) and debate on a veto message in the Senate under this section shall be 1 hour equally divided between the majority and minority leaders or their designees.
“(V) Rules of House of Representatives and Senate—This subparagraph is enacted by Congress—
“(aa) as an exercise of the rulemaking power of the Senate and House of Representatives, respectively, and as such it is deemed a part of the rules of each House, respectively, but applicable only with respect to the procedure to be followed in that House in the case of a joint resolution, and it supersedes other rules only to the extent that it is inconsistent with such rules; and
“(bb) with full recognition of the constitutional right of either House to change the rules (so far as relating to the procedure of that House) at any time, in the same manner, and to the same extent as in the case of any other rule of that House.
“(H) Penalty rate
“(i) In general—Not later than 6 months after the date of enactment of this subparagraph, the Board shall, with respect to a recipient of any loan or other financial assistance under this paragraph, establish by rule a minimum interest rate on the principal amount of any loan or other financial assistance.
“(ii) Minimum interest rate defined—In this subparagraph, the term minimum interest rate shall mean the sum of—
“(I) the average of the secondary discount rate of all Federal reserve banks over the most recent 90-day period; and
“(II) the average of the difference between a distressed corporate bond yield index (as defined by rule of the Board) and a bond yield index of debt issued by the United States (as defined by rule of the Board) over the most recent 90-day period.
“(I) Financial institution participant defined—For purposes of this paragraph, the term financial institution participant—
“(i) means a company that is predominantly engaged in financial activities (as defined in section 102(a) of the Financial Stability Act of 2010 (12 U.S.C. 5311(a))); and
“(ii) does not include an agency described in subparagraph (W) of section 5312(a)(2) of title 31, United States Code, or an entity controlled or sponsored by such an agency.”
Sec. 5 Interest rates on balances maintained at a Federal Reserve Bank by depository institutions established by Federal Open Market Committee
Subparagraph (A) of section 19(b)(12) of the Federal Reserve Act (12 U.S.C. 461(b)(12)(A)) is amended by inserting “established by the Federal Open Market Committee” after “rate or rates”.
Sec. 6 Membership of Federal Open Market Committee
Section 12A(a) of the Federal Reserve Act (12 U.S.C. 263(a)) is amended—
in the first sentence, by striking “five representatives of the Federal Reserve banks to be selected as hereinafter provided” and inserting “one representative from each of the Federal Reserve banks”;
in the second sentence, by striking “and, beginning” and all that follows through “San Francisco”; and
by striking the third and fourth sentences.
Sec. 7 Bringing the non-monetary policy related functions of the Board of Governors of the Federal Reserve System into the appropriations process
In general— The Federal Reserve Act is amended by inserting after section 11B the following:
“11C. Appropriations requirement for non-monetary policy related administrative costs
“(a) Appropriations requirement
“(1) Recovery of costs of annual appropriation—The Board of Governors of the Federal Reserve System and the Federal reserve banks shall collect assessments and other fees, as provided under this Act, that are designed to recover the costs to the Government of the annual appropriation to the Board of Governors of the Federal Reserve System by Congress. The Board of Governors of the Federal Reserve System and the Federal reserve banks may only incur obligations or allow and pay expenses with respect to non-monetary policy related administrative costs pursuant to an appropriations Act.
“(2) Offsetting collections—Assessments and other fees described under paragraph (1) for any fiscal year—
“(A) shall be deposited and credited as offsetting collections to the account providing appropriations to the Board of Governors of the Federal Reserve System; and
“(B) shall not be collected for any fiscal year except to the extent provided in advance in appropriation Acts.
“(3) Limitation—This subsection shall only apply to the non-monetary policy related administrative costs of the Board of Governors of the Federal Reserve System.
“(b) Definitions—For purposes of this section:
“(1) Monetary policy—The term monetary policy means a strategy for producing a generally acceptable exchange medium that supports the productive employment of economic resources by reliably serving as both a unit of account and store of value.
“(2) Non-monetary policy related administrative costs—The term non-monetary policy related administrative costs means administrative costs not related to the conduct of monetary policy, and includes—
“(A) direct operating expenses for supervising and regulating entities supervised and regulated by the Board of Governors of the Federal Reserve System, including conducting examinations, conducting stress tests, communicating with the entities regarding supervisory matters and laws, and regulations;
“(B) operating expenses for activities integral to carrying out supervisory and regulatory responsibilities, such as training staff in the supervisory function, research and analysis functions including library subscription services, and collecting and processing regulatory reports filed by supervised institutions; and
“(C) support, overhead, and pension expenses related to the items described under subparagraphs (A) and (B).”
Effective date— The amendments made by this section shall apply with respect to expenses paid and fees collected on or after October 1, 2018.
Sec. 8 Amendment to appointment of presidents of Federal Reserve Banks
The fifth subparagraph of the fourth undesignated paragraph of section 4 of the Federal Reserve Act (12 U.S.C. 341) is amended by striking “Class B and Class C directors” and inserting “board of directors”.
Sec. 9 Federal Open Market Committee blackout period
Section 12A of the Federal Reserve Act (12 U.S.C. 263), as amended by section 2, is further amended by adding at the end the following new subsection:
“(f) Blackout period
“(1) In general—During a blackout period, the only public communications that may be made by members and staff of the Committee with respect to macroeconomic or financial developments or about current or prospective monetary policy issues are the following:
“(A) The dissemination of published data, surveys, and reports that have been cleared for publication by the Board of Governors of the Federal Reserve System.
“(B) Answers to technical questions specific to a data release.
“(C) Communications with respect to the prudential or supervisory functions of the Board of Governors.
“(2) Blackout period defined—For purposes of this subsection, and with respect to a meeting of the Committee described under subsection (a), the term “blackout period” means the time period that—
“(A) begins immediately after midnight on the day that is one week prior to the date on which such meeting takes place; and
“(B) ends at midnight on the day after the date on which such meeting takes place.
“(3) Exemption for chairman of the board of governors—Nothing in this section shall prohibit the Chairman of the Board of Governors of the Federal Reserve System from participating in or issuing public communications.”
Sec. 10 Salaries, financial disclosures, and office staff of the Board of Governors of the Federal Reserve System
by redesignating the second subsection (s) (relating to “Assessments, Fees, and Other Charges for Certain Companies”) as subsection (t); and
by adding at the end the following new subsections:
“(u) Prohibited and restricted financial interests and transactions—The members and employees of the Board of Governors of the Federal Reserve System shall be subject to the provisions under section 4401.102 of title 5, Code of Federal Regulations, to the same extent as such provisions apply to an employee of the Securities and Exchange Commission.
“(v) Disclosure of staff salaries and financial information—The Board of Governors of the Federal Reserve System shall make publicly available, on the website of the Board of Governors, a searchable database that contains the names of all members, officers, and employees of the Board of Governors who receive an annual salary in excess of the annual rate of basic pay for GS–15 of the General Schedule, and—
“(1) the yearly salary information for such individuals, along with any nonsalary compensation received by such individuals; and
“(2) any financial disclosures required to be made by such individuals.”
Office staff for each member of the Board of Governors— Subsection (l) of section 11 of the Federal Reserve Act (12 U.S.C. 248) is amended by adding at the end the following: “Each member of the Board of Governors of the Federal Reserve System may employ, at a minimum, 2 individuals, with such individuals selected by such member and the salaries of such individuals set by such member. A member may employ additional individuals as determined necessary by the Board of Governors.”.
Sec. 11 Vice Chairman for Supervision report requirement
Paragraph (12) of section 10 of the Federal Reserve Act (12 U.S.C. 247b) is amended—
by redesignating such paragraph as paragraph (11); and
in such paragraph—
by striking “shall appear” and inserting “shall provide written testimony and appear”; and
by adding at the end the following: “If, at the time of any appearance described in this paragraph, the position of Vice Chairman for Supervision is vacant, the Chairman or their designee shall appear instead and provide the required written testimony.”.