H.R. 4975: Timely Oversight of Operations, Liquidity, Accountability, Targeting, and Effectiveness Act

This bill, known as the Timely Oversight of Operations, Liquidity, Accountability, Targeting, and Effectiveness Act (or the TOO LATE Act), proposes changes to the rules regarding the removal of the Chairman of the Board of Governors of the Federal Reserve System. Here are the key points of the legislation:

Amendments to Removal Procedures

• The bill modifies Section 10 of the Federal Reserve Act by adding criteria for the President to remove the Chairman.
• Specifically, the President can remove the Chairman if the Federal funds target rate deviates by more than 200 basis points from the average of two defined benchmarks for two consecutive quarters.

Benchmarks for Evaluation

The benchmarks considered for the evaluation of the Federal funds target rate include:

• The Implicit Price Deflator for Personal Consumption Expenditures.
• The difference in yield between a 5-year Treasury bond and a 5-year Treasury Inflation-Protected Security (TIPS).
• The difference between unemployment estimates from the Board of Governors and projections from the Congressional Budget Office.

Procedures Following Deviation

• If the Federal funds target rate deviates from the benchmarks, the President must provide a written justification for the removal decision, including relevant data and a discussion of monetary policy actions.
• This justification must be submitted to Congress and made available to the public.

Congressional Oversight

After the President issues a removal statement, Congress will conduct oversight through hearings:

• The House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs must hold hearings within 30 days to analyze the President's justification for the removal.

Definition of Federal Funds Target Rate

The bill defines the Federal funds target rate as the upper limit of the target range for the Federal funds rate established by the Federal Open Market Committee. This ensures clarity on what is being referred to when discussing deviations here.

Relevant Companies

• JPM – JPMorgan Chase & Co.: As a major financial institution, any changes in the Federal Reserve leadership could affect monetary policy, which may influence interest rates and market conditions that impact the bank's operations.
• BAC – Bank of America Corporation: Similar to JPMorgan Chase, adjustments in the Federal Reserve's approach to monetary policy may affect Bank of America's lending practices and profitability.
• C – Citigroup Inc.: Changes in the leadership of the Federal Reserve could have implications for Citigroup's strategies regarding loans and investments, which depend heavily on interest rate policies.