The U.S. Treasury, under Secretary Scott Bessent, has recently called for a sweeping review of the Federal Reserve’s non-monetary policy operations, citing concerns about “mission creep” and the need to safeguard the Fed’s independence. This move comes amid heightened political scrutiny of the central bank’s activities, particularly as debates intensify over interest rates, regulatory policy, and a controversial $2.5 billion headquarters renovation project.

Scope of the Review: What’s Under Scrutiny?

The Treasury’s request is not for a review of the Fed’s core monetary policy—such as interest rate decisions or quantitative easing—but rather its non-monetary policy operations. These include:

• Regulatory and Supervisory Activities: The Fed’s role in overseeing large financial institutions, including its supervisory rating frameworks and regulatory capital requirements.
• Operational Spending and Projects: Notably, the $2.5 billion renovation of the Fed’s Washington, D.C. headquarters, which has drawn criticism for cost overruns and timing, given the Fed’s recent operating losses.
• Broader Institutional Performance: Secretary Bessent has suggested examining the “entire Federal Reserve institution and whether they have been successful,” raising questions about the effectiveness and efficiency of the Fed’s operations beyond its traditional mandate (Reuters, Daily Sabah).

Reasons for the Review: Independence and Accountability

Secretary Bessent’s public statements emphasize two main concerns:

• Mission Creep: Bessent argues that the Fed’s autonomy is “threatened by persistent mandate creep into areas beyond its core mission,” which could undermine its independence in setting monetary policy (Economic Times).
• Transparency and Efficiency: The Treasury is responding to criticism that the Fed’s operations—especially large expenditures and regulatory actions—lack sufficient oversight and public accountability. The call for review is partly a response to political pressure from the White House and Congress, as well as public concern over the Fed’s recent financial losses and spending (Mercatus Center).

Key Issues Highlighted

• Headquarters Renovation: The $2.5 billion project has become a flashpoint, with critics questioning both the necessity and the management of the renovation, especially as the Fed posts operating losses.
• Regulatory Overreach: There is concern that the Fed’s expanding role in financial regulation and supervision may be straying from its original mandate, potentially exposing it to political interference.
• Calls for Broader Accountability: Some lawmakers and policy analysts are pushing for external audits and greater congressional oversight of the Fed’s budget and operations, which are currently less transparent than those of other federal agencies.

Official Statements and Political Context

• Secretary Bessent’s Position: In a series of interviews and social media posts, Bessent has reiterated the importance of the Fed’s independence but insists that “persistent mandate creep” must be addressed to preserve that independence (Fortune, PYMNTS).
• White House and Congressional Pressure: President Trump and Republican lawmakers have increased scrutiny of Fed Chair Jerome Powell, particularly over interest rate policy and the renovation project. There have been discussions about the legal and political feasibility of removing Powell before his term ends in May 2026, though Bessent has reportedly advised against such a move (Washington Examiner).
• Fed’s Response: Chair Powell and the Fed have defended their actions, citing the need for safety upgrades and regulatory compliance in the renovation, and emphasizing the importance of maintaining policy independence in the face of political pressure.

Recent and Related Developments

• Regulatory Reform: The Treasury has also signaled a broader push for regulatory modernization, including a review of capital requirements and a rollback of certain rules, such as the 2023 Community Reinvestment Act final rule (Federal Reserve Press Release).
• Public Accountability: There is a growing call for the Government Accountability Office (GAO) and independent inspectors general to have greater authority to audit and review the Fed’s operations, a move that would bring the central bank in line with other federal agencies (Mercatus Center).

Conclusion

The U.S. Treasury’s call for a review of the Federal Reserve’s non-monetary policy operations marks a significant moment in the ongoing debate over the central bank’s role, independence, and accountability. While the review is framed as a necessary step to protect the Fed’s core mission, it also reflects deeper political and economic tensions over the direction of U.S. monetary and regulatory policy. The outcome of this review—and the broader push for reform—could have lasting implications for the structure and governance of the Federal Reserve System.

For further details, see coverage from Reuters, Fortune, and the U.S. Treasury’s official statements.