Haters sometimes accuse the Federal Reserve of being a shadowy cabal of private bankers that slipped loose from democratic oversight. But we at The Sling trust our patriotic central bankers, who have never had anything to hide. To help the Fed tell its side of the story, we submitted a Freedom of Information Act (FOIA) request to retrieve recent meeting minutes.
Readers may be surprised to learn that although the Fed has acquired a great deal of independent authority, in some circumstances it must consult with other financial regulators, including the Federal Deposit Insurance Corporation (FDIC). The FDIC’s five-member board includes the FDIC Chair, the Comptroller of the Currency, two members of the minority party, and, much to the Fed’s chagrin, the Director of the Consumer Financial Protection Bureau (CFPB)—an agency created in the wake of the Great Financial Crisis to protect consumers from financial scams and frauds. The CFPB is housed within and funded by the Fed, yet sometimes in its short history it has been led by a director who violates Fed norms by having different values and expressing different opinions than the Fed Chair.
The below meeting minute excerpts shine light on the internal operations of the Fed and its valiant efforts to rein in consensus-destroyer Rohit Chopra, the outgoing director of the CFPB.
Minutes of the Board of Governors of the Federal Reserve System
At its meeting yesterday, the Board discussed how the market-implied path for the federal funds rate forecasted certain headwinds to central bank hegemony (aka “bankocracy”). In particular, over the intermeeting period, options on interest rate futures indicated that market participants were increasingly exasperated with Rohit Chopra.
Such developments reflected elevated concerns among investors that Chopra would not only continue to penalize a broad range of business innovation by returning billions of dollars to swindled consumers, but would also decline to rubber-stamp the Fed’s Basel III endgame proposal to allow banks to hold only a single-digit percentage of capital as a cushion against potential losses. Congress had directed the Fed to impose these reserve requirements shortly after the Great Financial Crisis. That the process is still in the proposal stage over a decade later confirms what the Fed tells every interviewer: its biggest fault is being a perfectionist. The Fed is strongly committed to crafting every clause just right, and sometimes unweaves an entire tapestry at night to punish itself for typos and ward off inappropriate suitors. In any event, the Fed recently retained a new associate therapist; a development that warrants greater investor confidence in a declining VIX and short-term higher yields on its regulatory efforts. Members also concurred that although the Fed sets the price of money, it cannot reasonably be characterized as a “price control agency” because reasons.
Market-based measures of exasperation were further articulated by one Board member who explained that Chopra’s un-collegial actions never would have been tolerated by past chairs: “Paul [Volcker] would have been shocked.” The Board then reviewed other deviations from consensus, such as Chopra’s decision to jeopardize national security by stopping financial institutions from stockpiling strategic junk fee reserves—a policy in marked tension with his professed goal of increasing capital reserves.
A second Board member remarked upon Chopra’s stellar credentials and their alignment with the Fed milieu: Harvard undergrad, Wharton MBA, and close relationships with “financiers, convicted felons, and everything in between.” The member likewise approvingly noted that so far, Chopra has not publicly questioned Supreme Court dicta retconning the existence of the Fed as Constitutionally sound based on the rigorous principle of being a “special arrangement sanctioned by history.” The member further recognized and commended Chopra’s benefits orientation sessions, which helped Board colleagues and staff sign up for the best available health and life insurance options, making Open Enrollment much less stressful. Perhaps as a gesture of good faith, Chopra could also set up a dollar movie night for the incoming staff?
Polite nodding ensued.
A third Board member recalled Chopra’s efforts to oppose political debanking, which encompassed legal action to advance free speech and due process in the banking sector.
Polite nodding ensued again.
Staff then interceded with an update: venture capitalists with a deep portfolio of stage-agnostic bank run expertise have just redefined “debanking” to encompass anti-money laundering requirements that target drug trafficking, terrorism, and fraud. Industry sentiment, as reflected by the whims of the world’s richest man, thus favored action to “Delete CFPB.”
Furrowed brows and smirks ensued.
Consistent with the shift in investors’ perceptions of the balance of risks, nominal Treasury yields across the maturity spectrum increased significantly. Credit quality remained solid in the cases of large and midsize firms, but deteriorated in other sectors. Delinquency rates for credit cards inched upwards. Market data, in other words, suggested aggregate dissatisfaction with Chopra.
A fourth Board member noted Chopra’s decisions to enact a rule that helps consumers easily switch banks, initiate a review of the FDIC’s merger policies under the guise of “financial stability,” and otherwise leverage the so-called “Chopra Doctrine,” a radical enforcement ideology that consists of actually reading a statute and then using it. Moreover, it was Chopra who first recruited Lina Khan to work at the Federal Trade Commission.
Anger and literal shaking ensued, as these actions transgress the most fundamental Fed consensus norm: the banker welfare standard.
Ultimately, Board consensus deemed Chopra “not a great culture fit” due to his “unreserved and sometimes devastating facial expressions.”
Board members’ ensuing discussion included consideration of options for enhancing Chopra’s understanding of institutional norms, including through collegial exchanges of kitchen utensils and educational water sports.
Given the unusual and exigent circumstances, staff were tasked with implementing the discussed actions on an expedited basis by January 20, 2025, as well as with memorializing the actions through videographic means to inform future CFPB directors about Fed norms. As Chopra himself has observed, institutions “must forcefully address” repeat offenders.
The Chair then adjourned the meeting with the standard ritual sacrifice of depositors at a tiny midwestern bank.
ATTENDANCE:
Jerome H. Powell, Chair
Four other Board members
Various associate directors and senior advisers
Several secretaries and lawyers
Emergency backup economists
Laurel Kilgour is a law and policy wrangler. The views expressed herein do not represent the views or sense of humor of the author’s employers or clients, past or present. This is not legal advice about any particular legal situation. Void where prohibited.