Congressional Watchdog To Investigate Wall Street Regulation

This is the first probe to consider whether regulators are "captured" by banks they monitor.
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NEW YORK (Reuters) - 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.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

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