House Panel Approves Fed Audits, Carves Small Banks Out of Reform Fees

The House Financial Services Committee Thursday approved two hotly-contested amendments to the financial services industry reform bill. One would give Congress the right to audit the Federal Reserve while the other exempts small banks and credit unions from paying fees into a fund that will be used in dissolving massive financial institutions.

Both measures were opposed at very high levels.

The committee approved an amendment sponsored by Rep. Brad Sherman (D-Calif.) on a 52-17 vote that limits the firms. Federal regulators can assess to raise money for a fund to cover the costs of dissolving failing banks and financial firms. Only financial firms with at least $50 billion in assets will be assessed to pay for the dissolution fund.

Committee Chairman Barney Frank (D-Mass.) opposed the measure, as did most large Wall Street financial firms. Frank wanted a $10 billion asset threshold and the ability to assess fees based on the risk in a bank’s investment portfolio.

The fee carve out was widely supported by small bank organizations and credit union groups.

The other measure that passed the committee was the highly publicized proposal pushed by Rep. Ron Paul (R-Texas) that would give Congress the authority to audit the Federal Reserve’s monetary policy.

On a 43-26 vote, the committee passed the measure, which will also reveal how much the Fed has lent and will lend to specific banks. The measure would require the Government Accountability Office to complete the Fed audit within 12 months of passage of the underlying bill.

Fed Chairman Ben Bernanke and other key members of the Obama administration, including Treasury Secretary Tim Geithner, had pushed hard against the measure. Frank also opposed the proposal.

Both amendments will be included in a financial system reform bill that is due to be delivered to the full House for consideration in the first week of December.