House Clears New IG Independence Bill

House lawmakers have approved a measure granting greater independence to watchdogs at five federal agencies managing financial and commodities markets.

The bill affects inspectors general at the Board of Governors of the Federal Reserve System, Commodity Futures Trading Commission, the National Credit Union Administration, the SEC, and the Pension Benefit Guaranty Corporation. As The Eye reported last week, those five IGs would move from "non-independent" status to independent, or "established" status, on par with IGs at 32 other federal agencies.

Rep. John B. Larson (D-Conn.), the bill's lead sponsor, argues that watchdogs at the five regulatory agencies need greater flexibility and less potential interference from agency officials as they investigate the fallout from the economic downturn.

"The regulators of these markets have been allowed to work with no oversight of what they are doing and whether they are fulfilling their mission to protect the American consumer," Larson said today.

"Simply stated -- independent watchdogs ensure better performance from government agencies," he said later.

The bill comes as congressional investigators pursue allegations of interference with watchdog investigations at several federal agencies, including the Library of Congress. The Senate Banking Committee is soon expected to consider Larson's measure, according to House aides.

UPDATE June 9, 10:24 a.m. ET: This bill may prove even more important amid reports that the Obama administration is backing away from a proposed merger of financial regulatory agencies.