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Senate move gives watchdogs more independence

By Ed O'Keefe

Senators approved an amendment to the financial regulation bill Tuesday night that keeps federal watchdogs at five financial regulatory agencies from becoming presidential appointments.

The Senate voted 75 to 21 to make the five inspectors general accountable to all of an agency's commissioners instead of just the agency chief. Removing a watchdog would require the approval of two-thirds of commissioners, who would have to provide a reason for the dismissal to Congress in writing.

At least 69 federal inspectors general investigate allegations of government corruption and personnel matters. Approximately 30 of the positions are presidential appointees while the rest -- including the five financial watchdogs -- are hired by the heads of smaller, independent agencies.

The amendment was introduced by Sens. Claire McCaskill (D-Mo.) and Charles E. Grassley (R-Iowa), two longtime advocates for federal inspectors general.

"It is a bad idea to change right now how these inspectors general are selected," McCaskill said Tuesday before the vote. "We need continuity right now, we need consistency." Her amendment would keep watchdogs from developing "cozy relationships" with the agency boss, she said.

The five watchdogs impacted by the bill -- at the Federal Reserve Board of Governors, the Commodity Futures Trading Commission, the National Credit Union Administration, the Securities and Exchange Commission, and the Pension Benefit Guaranty Corp. -- actively campaigned for the Senate amendment, arguing their work would be spoiled by partisan politics and the election cycle if the president could hire and fire them.

"My position would become a political one and my status would be that as a lame duck until a new inspector is appointed," said SEC Inspector General H. David Kotz.

At least some of the watchdogs would be out of a job if their positions became presidential appointments. Congressional Republicans are especially concerned for Kotz, who's investigating the SEC's decision to file fraud charges against Goldman Sachs at their request.

William DeSarno, inspector general at NCUA, said his agency is too small for a presidential appointee. "I just don’t think that would be a good idea to bring in a presidential appointee to supervise a staff of nine people and add the political environment on top of what we’re trying to do here," he said.

PBGC Inspector General Becky Batts said the McCaskill-Grassley measure does more to ensure their independence by requiring the agencies to give cause for dismissal. "Requiring that a majority of the board concurs in the decision might protect IGs against one person who might be upset," she said.

The amendment's approval puts the Senate package at odds with the House financial reform bill, which includes a proposal by Rep. John Larson (D-Conn.) to elevate the five watchdogs to the presidential appointment level. Larson's measure would hold the five watchdogs to a higher standard and make them more accountable to the White House and Congress, he said.

But Grassley said the Larson plan "could introduce politics into what has traditionally been career, nonpolitical positions." McCaskill said it would needlessly add five more officials to the hundreds that currently require Senate approval.

"I certainly don't want the IGs for these agencies to be held up with secret holds over the next couple of years and us to have a lack of continuity and uncertainty," she said. Indeed 15 of the 73 federal watchdog positions are vacant partly because of the slow Senate confirmation process, according to a recent study by the Center for Public Integrity.

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By Ed O'Keefe  | May 19, 2010; 10:55 AM ET
Categories:  Congress, Oversight  
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