Andy Levin on Holding the Fed Accountable

Episode Summary

Executive Summary: Andy Levin argues the Federal Reserve has become unusually insulated from external scrutiny, leading to questionable staffing, compensation, building spending, IT oversight, and balance-sheet losses. He says a fully independent IG and GAO review would strengthen—not weaken—Fed independence by improving accountability, transparency, and public legitimacy.

Main Topics: Why Levin wrote the brief (Priority: 5/5): Levin explains that criticism from DOGE and Powell’s response prompted him to review public Fed documents and ask whether the Fed is overstaffed or overworked. Fed accountability and the case for external review (Priority: 5/5): He contrasts the Fed with other central banks and U.S. agencies, arguing the Fed lacks the independent IG and GAO scrutiny that routinely disciplines comparable institutions. Staffing and compensation growth (Priority: 4/5): The brief finds Fed employment and pay have risen faster than in comparable public institutions, raising concerns about whether salaries and headcount are well justified. Headquarters renovation and capital spending (Priority: 5/5): Levin says the Fed’s $2.5 billion headquarters project on the National Mall resembles a luxury palace upgrade rather than a basic public renovation. Operational performance and public value (Priority: 4/5): He points to forecasting errors, the underperformance of FedNow, and information-security failures as examples of why ex post review is needed. Inspector general vacancy and governance (Priority: 5/5): The IG’s resignation and the lack of a Fed press release are presented as evidence that the institution avoids scrutiny and should move to a fully independent inspector general.

Key Arguments: The Federal Reserve is an outlier among major public institutions because it lacks meaningful external review from an independent IG or GAO, despite its vast powers and losses borne by taxpayers. Fed staffing growth does not look obviously justified relative to other federal agencies, many of which have shrunk over the same period due to digital efficiency gains. Fed compensation has drifted far above comparable public-sector pay, including salaries that exceed the President, Treasury Secretary, and federal judges. The Fed’s $2.5 billion building program is unusually lavish and should have been subject to stricter oversight because it involves public money and public assets on the National Mall. The Fed’s balance-sheet programs have generated losses exceeding $1.5 trillion, yet the institution has not provided a meaningful public cost-benefit or lessons-learned review. FedNow’s weak adoption and the Fed’s alleged information-security failures show why independent oversight matters for operational effectiveness and risk management. A fully independent IG would not undermine Fed independence; it would strengthen credibility, transparency, and legitimacy by making the Fed more accountable to Congress and the public.

Data Points: Federal Reserve Banks employment growth since 2010: 25% increase - Levin cites this as evidence of stronger hiring at the regional Federal Reserve Banks. Federal Reserve Board employment growth since 2010: 17% increase - He compares this with other agencies that have generally reduced headcount. Other large federal agencies' employment trend: Shrunk over the last 15 years - Used as a contrast to Fed staffing growth. Fed balance-sheet losses: More than $1.5 trillion - Levin argues the Fed has not adequately explained these taxpayer costs. Fed headquarters renovation budget: $2.5 billion - The cost of revitalizing the Eccles/Martin building complex on the National Mall. Interior Department building transfer price to Fed: $41 million - Fed acquired a historic building from GSA with an expectation of modest renovation costs. Department of Homeland Security renovation cost: A little over $100 million - Comparable renovation for about 2,500 staff at the Reagan Building, used as a benchmark against the Fed’s project. FedNow transaction volume: 4,000 transactions per day - Reported as of December 2024, about 15 months after launch. FedNow launch date: August 2023 - Levin cites this to show the system’s limited uptake after more than a year. Federal Reserve Board staff size: About 3,000 employees - Used in comparisons of pay and building costs. Treasury Department staff size: About 110,000 employees - Used to highlight the Fed’s higher pay relative to a much larger agency. Fed Board chief financial officer pay: Close to $350,000 - Compared against the Treasury CFO’s salary. Treasury chief financial officer pay: About $220,000 - Used as a benchmark for similar public-sector work. Federal Reserve Bank presidents' pay: About $450,000 - Levin says this is above the President, Treasury Secretary, and federal judges. U.S. President salary: $400,000 - Referenced as lower than Fed regional bank presidents' pay. Treasury Secretary salary: About $245,000 - Used as a comparison point for Fed compensation. Federal judge salary: About $240,000 - Used to illustrate that Fed regional presidents earn nearly double.

Pivotal Quotes: "The Federal Reserve is an anomaly in the universe of central banks." — Andy Levin: Levin summarizes his critique of the Fed’s lack of external oversight and unusual autonomy. "It's basically building a palace on the Mall at taxpayer expense." — Andy Levin: His description of the Fed’s headquarters revitalization project and its perceived extravagance. "The Federal Reserve's IG was certifying the Fed's IT information security as effective all through this period... as the economic espionage was occurring or at least alleged to have been occurring." — Andy Levin: He uses this to argue that an independent IG is necessary to avoid conflicts of interest.

Implications: The episode argues Congress should require an independent IG and GAO-style reviews of the Fed. If not, staffing, pay, capital spending, and operations may continue to drift without adequate public accountability.