Overview
Title
To amend the Federal Reserve Act to bring the non-monetary policy related functions of the Board of Governors of the Federal Reserve System into the appropriations process, and for other purposes.
ELI5 AI
The H. R. 2418 bill wants to make rules so the government checks the money the Federal Reserve uses for jobs like watching over banks. Starting in 2026, Congress has to approve this spending.
Summary AI
The H. R. 2418 bill proposes changes to the Federal Reserve Act to ensure that the non-monetary policy functions of the Board of Governors of the Federal Reserve System are included in the appropriations process. It mandates that the Board and the Federal Reserve Banks recover costs through assessments and fees, which are to be approved in advance as part of an appropriations act. This means that the Board can only spend money on activities like supervising banks and related administrative costs if Congress provides funding for these expenses. The changes would take effect starting fiscal year 2026.
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AnalysisAI
To amend the Federal Reserve Act, H.R. 2418, the "Federal Reserve Regulatory Oversight Act," was introduced in the House of Representatives. The bill aims to change how the non-monetary policy activities of the Federal Reserve's Board of Governors are funded. Essentially, it requires these activities, which include regulatory and supervisory roles typically not involving direct monetary policy, to be subject to the congressional appropriations process.
General Summary
This bill proposes significant changes to the funding process for certain functions of the Federal Reserve, specifically the tasks that do not directly relate to setting monetary policy, like overseeing and regulating financial institutions. Under this legislation, rather than self-funding these activities through its earnings, the Federal Reserve would need to rely on annual appropriations set by Congress. This change is slated to take effect on October 1, 2025.
Summary of Significant Issues
Several issues have been identified with the proposed legislation. Firstly, the bill lacks a clear and comprehensive definition of what constitutes "non-monetary policy related administrative costs." Without clarity, this could lead to confusion and broad interpretation, complicating implementation and oversight.
Secondly, while the bill establishes the need for congressional appropriations, it does not set forth mechanisms for accountability or regular review. The absence of a sunset clause or periodic assessment details could result in indefinite application without reassessment for relevance or efficacy.
Moreover, there is potential for transitional challenges due to the effective date of the legislation. If necessary budget and administrative processes are not aligned prior to October 1, 2025, this could lead to financial and operational disruptions for the Federal Reserve.
Furthermore, the bill’s requirement that assessments and fees offset appropriations costs could raise concerns. Without guidelines on fee setting, there might be unintended financial pressure on the entities being regulated.
Finally, the technical language used in defining "monetary policy" could pose comprehension challenges for those not versed in economics, potentially affecting the clarity and transparency of the policy changes for the general public and stakeholders.
Impact on the Public and Stakeholders
Public Impact
Broadly, the bill is intended to increase transparency and accountability by involving Congress more directly in the financial oversight of the Federal Reserve's regulatory functions. This might reassure the public regarding oversight of an institution that plays a significant role in the nation's economy. However, if the transition to this new funding structure is mishandled, potential disruptions could undermine confidence in the Federal Reserve.
Stakeholder Impact
The Federal Reserve itself, along with financial institutions subject to its regulations, could face significant adjustments. The Federal Reserve might experience constraints in funding and staffing for its regulatory activities, impacting its efficiency. Banks and other financial entities might bear the brunt of any fee increases implemented to comply with the new funding mandates, potentially affecting their operations and costs.
Conversely, Congress would gain additional oversight, aligning non-monetary policy activities with other federally funded programs that rely on appropriations. This shift could yield a more politically accountable structure but also risks injecting partisan considerations into traditionally apolitical financial oversight.
In conclusion, while the bill seeks to enhance transparency in the Federal Reserve's funding and accountability, it raises several implementation and operational challenges. Careful consideration of the mechanisms for oversight and transition will be crucial to minimizing any negative impacts on stakeholders.
Issues
The bill introduces new appropriations requirements for non-monetary policy related administrative costs, but lacks a clear definition and full scope of what constitutes 'non-monetary policy related administrative costs', potentially leading to broad interpretations and implementation challenges (Section 11D, subsections (a) and (b)).
There is no clear accountability or review process for the appropriations made under this bill, which could lead to wasteful spending. Additionally, the lack of a sunset clause or periodic review provision means these rules could remain in place indefinitely without re-evaluation for continued necessity or efficiency (Section 11D).
The effective date of October 1, 2025, may result in transitional issues if budgets and processes are not aligned in advance, leading to potential financial and administrative disruptions (Section 2).
The amendment requires assessments and fees to be collected to offset the costs of appropriations, but does not address potential issues with fee setting or impacts on the entities being assessed, leading to financial concerns for those entities (Section 11D, subsection (a)(1)).
The technical language used in the definition of 'monetary policy' may not be easily understood by those without a background in economics, which could impact the clarity and transparency of the bill to the general public and stakeholders (Section 11D, subsection (b)(1)).
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the bill indicates that it can be referred to as the "Federal Reserve Regulatory Oversight Act."
2. Bringing the non-monetary policy related functions of the Board of Governors of the Federal Reserve System into the appropriations process Read Opens in new tab
Summary AI
The section amends the Federal Reserve Act to require that the Board of Governors of the Federal Reserve System must rely on Congress for funding related to non-monetary policy activities, such as overseeing and regulating banks, instead of covering these expenses themselves. These amendments are set to take effect starting October 1, 2025, ensuring that related expenses are paid and fees collected align with congressional appropriations.
11D. Appropriations requirement for non-monetary policy related administrative costs Read Opens in new tab
Summary AI
The section requires the Federal Reserve to cover its non-monetary policy related administrative costs through fees collected, as authorized by Congress. These costs include operating expenses related to supervising and regulating financial entities, and the funds collected must be credited back to their appropriations account.