Republican senator says Fed has revoked master account for controversial fintech -Breaking
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© Reuters. FILE PHOTO: Ranking member Senator Pat Toomey, questions Treasury Secretary Janet Yellen during the Senate Banking, Housing, and Urban Affairs Committee hearing titled “The Financial Stability Oversight Council Annual Report to Congress,” in Dirksen SBy Pete Schroeder
WASHINGTON, (Reuters) – A Republican senator has asked for answers from Kansas City’s Federal Reserve Bank after it retracted a master account sought by a fintech known as Reserve Trust.
Reuters received a letter from Senator Pat Toomey stating that Kansas City Fed President Esther George had “been brought to my attention” that the Federal Reserve bank had revoked Colorado’s fintech’s Federal Reserve master accounts. This allowed it to access the Fed’s payment services. A rare feat for a fintech.
Toomey failed to specify the circumstances by which he discovered that his account had been closed. The Kansas City Fed spokesperson declined to comment. Emails to the Reserve Trust contact information went unanswered.
Toomey claimed that this development raises new questions regarding the Fed’s approval of master accounts. Fintech firms and crypto companies have started to push for access to these services. Traditionally, traditional banks have been able to use them.
Fed is undergoing a revamp in the application process. In March, it proposed a tiered review proposal. This would allow for less scrutiny of federally insured institutions and more review for uninsured firms not under bank supervision.
In 2017, the Kansas City Fed rejected Reserve Trust’s request for a master bank account. However, it granted one to Reserve Trust in 2018. The Fed said that Reserve Trust had made changes in its business model and was requesting a master account.
This decision was controversial because Sarah Bloom Raskin (a former Fed Governor who served on the board of Reserve Trust) was involved in this controversy. Toomey claimed that Raskin was previously appointed by President Joe Biden for another Fed job. George personally called Raskin in 2017 to discuss the request.
Raskin claimed she had adhered to ethical standards. However, the controversy helped to solidify Republican opposition to Raskin’s nomination. Raskin resigned from consideration.
“This development heightens the significant concerns already surrounding the fairness, transparency, and consistency of the Federal Reserve System’s approach to master account applications,” wrote Toomey.
He sought information from KC Fed about its communications to Reserve Trust as well as any supporting documents.
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