U.S. senators on both sides of the aisle warned that the Federal Reserve’s Inspector General could have a financial incentive to not properly investigate other Fed officials, Reuters reported on Tuesday.
Democratic Massachusetts Sen. Elizabeth Warren and Republican Florida Sen. Rick Scott have asked Mark Bialek, the Fed’s internal Inspector General, to turn over specific information about his salary, according to a letter obtained by Reuters. The request comes amidst a bipartisan effort to increase oversight of the banking sector, and concerns that the Fed IG role is not independent enough from the organization to make unbiased decisions, Reuters reported Tuesday.
Part of that concern stems from the fact that Bialek reports directly to the Fed’s board, unlike other agencies like the Pentagon, whose IG reports directly to the government. Bialek’s salary structure is also directly tied to the compensation of Fed officials who he is tasked to investigate, which raises the possibility of conflicts of interest, the senators wrote in the letter.
Warren and Scott have proposed new legislation that would have the Fed IG role be chosen by the president and confirmed by the Senate.
“Because the Fed Inspector General’s salary is in part based on the bonuses earned by other Fed employees… there is a structural, financial incentive for the IG to overlook or downplay wrongdoing by those Fed officials,” the senators wrote in the letter. “These types of conflicts are why we have introduced legislation.”
Warren and Scott posed five questions to Bialek in the letter, including what salary he had received in the past five years, what percentage of his salary structure was based on bonus compensation and whether any investigations he conducted were connected to bonuses he received, according to Reuters.
At a Senate hearing earlier in May, Warren reprimanded Bialek about an incomplete investigation which he was responsible for and accused him of being “compromised” within the Fed, Reuters reported.
“The people who hired you and who have the power to fire you — that dynamic tends to create watchdogs that don’t bark,” Warren said. “At best, you are in an impossible compromised position when it comes to investigating wrongdoing at the Fed.”
Bialek defended the Fed during his hearing, assuring the Senate his investigations were truthful and independent from bias.
“No Board Chair has resisted or objected to our oversight work since I have been the IG,” he said at the time.
The Federal Reserve did not immediately respond to a request for comment.
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