Senators Call for Independent Fed Inspector General

Republican and Democratic Senators urged the Federal Reserve ("Fed") to support legislation establishing an independent inspector general ("IG") at the central bank.

In a bipartisan letter to Federal Reserve Chair Jerome Powell, Ranking Member of the Senate Banking Committee Elizabeth Warren and Republican Senators Rick Scott and Cynthia Lummis argued that the Fed’s current oversight structure—under which its inspector general is appointed, supervised, and compensated by the Federal Reserve Board—creates a clear conflict of interest. They contended that this arrangement allows the institution and its watchdog to shield misconduct and erode public trust. The Senators’ bipartisan bill seeks to address this problem by establishing a "truly independent" inspector general to strengthen accountability and restore public confidence in the Fed.

The Senators also raised concern that current IG Michael Horowitz actively lobbied against the legislation, noting his visits to Capitol Hill and direct outreach to lawmakers. They said that this behavior continues a troubling pattern set by a previous inspector general who also opposed similar reforms. The Senators questioned whether Chair Powell, or any Federal Reserve staff, directed or encouraged these actions, emphasizing that such conduct undermines the integrity of the Fed’s oversight functions. The lawmakers called on Chair Powell to provide a written, public explanation of why the Federal Reserve opposes the creation of a truly independent watchdog and to disclose whether any Fed staff communications influenced the IG’s efforts to lobby against the legislation.