The US Federal Reserve is supposed to be an apolitical entity independent of the federal government seeking to achieve its low inflation and full employment mandate. The Fed also has oversight over the banking system as it aims to ensure a safe and secure banking ecosystem free of risk.
During the Senate Banking Committee hearing on Debanking, where government entities sought to punish individuals and firms due to activity deemed at odds with the Biden Administration, Senator Cynthia Lummis shared a poster highlighting an alleged internal memo distributed by the Fed.
According to the Senator, the Fed distributed internal guidance stating:
- Reserve Bank staff generally should consider the conduct of the institution and its leadership and whether association with the institution poses undue reputational risk to the Reserve Bank
- Is the institution’s leadership associated with controversial commentary or activities
Of course, such an opaque directive can be taken a lot of ways as it is up for interpretation, but the Constitution guarantees free speech. Still, the Biden Administration allegedly pushed regulators to undermine the digital asset sector by putting heat on regulated banks to steer clear of the unsavory industry. At the hearing, the founder and CEO of Anchorage Digital, a federally chartered digital bank, said he did not believe the banks were to blame for Debanking. It was the doing of Federal regulators.
Regardless, the Fed should respond to the claims shared by Senator Lummis as it sullies the reputation of the vaunted central bank which is vital to the efficacy of the global economy.