The Federal Reserve funds itself, making money on the buying and selling and holding of U.S. government and mortgage-backed securities, among other things. After paying its expenses, any profits go to the U.S. Treasury. It prizes this independence from the congressional appropriations process.
It seems the Senate Banking Committee has discovered the advantages of what one might call off-balance-sheet financing. In the latest version of the financial-regulatory bill unveiled by Chairman Chris Dodd on Monday, the committee shifts the budgets of all financial consumer-protection activities from half a dozen federal agencies to the Fed - and then makes explicit that the Fed would have little say over what the new consumer bureau, to be headed by a presidential appointee, would do.
Then theres a new Office of Financial Research to be established inside the Treasury to advise a new council of regulators. The Treasury budget, of course, is appropriated by Congress, but not this office.
The Fed would foot the bill for the next two years, then the Treasury secretary is to assess the largest financial institutions to cover the costs. To the extent that the assessments do not fully cover the total expenses of the office, the [Federal Reserve] Board of Governors shall provide to the office an amount sufficient to cover the difference, the Dodd bill says.