Are Fed and big banks too cozy? U.S. to investigate

Crain's Chicago Business reports:

A U.S. watchdog agency is preparing to investigate whether the Federal Reserve and other regulators are too soft on the banks they are meant to police, after a written request from Democratic lawmakers that marks the latest sign of distrust between Congress and the central bank.

Ranking representatives Maxine Waters of the House Financial Services Committee and Al Green of the Subcommittee on Oversight and Investigations asked the Government Accountability Office on Oct. 8 to launch the "evaluation of regulatory capture" and to focus on the New York Fed, according to a letter obtained by Reuters.

In an interview, the GAO said it has begun planning its approach.

The probe, which had not been previously reported or made public, is the first by an outside agency into the perception that government regulators are "captured" by and too deferential toward the bankers they supervise, so that Wall Street benefits at the public's expense.

Such perceptions have dogged the U.S. central bank since it failed to head off the 2007-2009 financial crisis. The Fed's biggest critics have since been Republicans looking to curb its policy independence, but the request by Democrats could cool its somewhat warmer relationship with the left.

Isn't it time to get rid of the Federal Reserve system?