Fed reviewing how it monitors big banks

The Federal Reserve announced Thursday that it was conducting a sweeping review of how it monitors the nation’s largest financial institutions.

The regulator announced two separate review projects, after the Fed has come under increasing scrutiny for what some see as a cozy approach towards policing Wall Street giants. The central bank examine its policies on handling internal disputes over its monitoring of massive banks, after high-profile accusations that suggestions for more vigorous approaches were stifled at lower levels.

{mosads}The Fed’s inspector general will be reviewing whether the Fed is able to obtain all necessary information from banks to properly oversee them, as well as whether there is room for dissent among Fed officials regarding a bank’s status.

The announcement came one day before the Senate Banking Committee is set to hold a hearing examining accusations that the Fed is overly deferential to some of the nation’s largest institutions it is tasked with keeping tabs on.

The hearings came about after a former Fed examiner publicly accused the Fed of resisting her efforts to more vigorously regulate Goldman Sachs. Carmen Segarra secretly recorded hours of meetings during her time at the Fed monitoring Goldman Sachs, which were reported on by ProPublica and This American Life.

In addition to the inspector general review, the Fed said it was also conducting its own review of its approach towards the biggest and most influential banks. That review will look at whether top Fed officials on the Federal Reserve Board are receiving the full regulatory picture from their subordinates. That review will also consider whether board members are privy to information regarding disagreements on regulatory approaches at lower levels of the Fed.