The Republican senator says the Fed has abolished the main account of controversial fintech

Senator Pat Toomey, ranked member, questions Finance Minister Janet Yellen during Senate Banking, Housing and City Council hearing entitled “The Financial Stability Oversight Council Annual Report to Congress,” in the Dirksen Senate office building in Washington, DC, USA, May 10 , 2022. Tom Williams / Pool via REUTERS

WASHINGTON, June 9 (Reuters) – A Republican senator is demanding an answer from the Federal Reserve Bank of Kansas City after he said it revoked a coveted master account that had previously been given to a fintech called the Reserve Trust.

In a letter received by Reuters, Senator Pat Toomey told Kansas City Fed President Esther George that it “has been made aware” that the Reserve Bank had revoked the Colorado-based fintech main account in the Federal Reserve, which gave it access to the Fed’s payment. services, a rare achievement for a fintech.

Toomey did not specify in the letter how he was informed that the account had been canceled. A spokesman for the Kansas City Fed declined to comment, and emails to contact information listed on the Reserve Trust website went unanswered.

But Toomey said the development only adds more questions about the Fed’s process of approving master accounts, as some fintechs and crypto firms have begun pushing for access to such services, which have typically been reserved for traditional banks.

The Fed itself is renewing the application process, and in March proposes a layered assessment proposal that applies to easier scrutiny of federally insured institutions, and closer review for companies that are not insured and are not directly monitored by bank regulators. read more

The Kansas City Fed initially rejected the Reserve Trusts’ application for a main account in 2017, but later granted one in 2018, saying the company had changed its business model.

However, this decision was at the center of a controversy surrounding Sarah Bloom Raskin, a former Fed governor who sat on the Reserve Trusts board. Toomey said Raskin, who had previously been nominated by President Joe Biden for another Fed post, personally called George in 2017 about the company’s application.

Raskin claimed that she followed all ethical standards, but the controversy helped strengthen opposition to her nomination of Republicans. Raskin eventually withdrew from the assessment. read more

“This development raises the significant concerns already surrounding the fairness, transparency and consistency of the Federal Reserve Systems’ approach to main account applications,” Toomey wrote.

He demanded details from the KC Fed about the communication with the Reserve Trust, and all the documents that support the decisions to give it an account.

Reporting by Pete Schroeder Editing by Nick Zieminski

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