Sen. Pat Toomey, the top Republican on the Banking Committee, is demanding answers from the Federal Reserve Bank of Kansas City about the status of a Fed master account for the Colorado fintech firm Reserve Trust, which had figured in a recent confirmation controversy.
“It has been brought to my attention that the Kansas City Fed recently revoked Reserve Trust’s master account after determining, among other things, that the company is no longer eligible for one,” Toomey said in a letter obtained by Bloomberg News to Kansas City Fed President and CEO Esther L. George.
Toomey said he had been “stonewalled” when he sought details on why the company received its master account in 2018, when former Fed governor and former deputy Treasury Secretary Sarah Bloom Raskin was on its board, and asked for a briefing and documents regarding the bank’s actions.
The bank’s awarding of the master account — and Raskin’s inability to recall a role in seeking it — helped unite GOP opposition to her nomination to become the Fed vice chair for supervision earlier this year.
“It is critical that the Federal Reserve System be transparent with the public and Congress on all matters,” Toomey wrote. “That principle becomes even more important when serious concerns are raised that undermine the public’s faith that the Fed makes decisions when granting a public good to a private actor in a fair and consistent manner on behalf of the American people, rather than what might be best for well-connected operators.”
The firm had touted its master account and direct access to the Fed payments system as a way to enable business-to-business transactions that bypass traditional banks. But it has since scrubbed its website of any mention of the account, though it’s still listed in the company’s
The company has not returned numerous calls and emails in recent weeks from Bloomberg News. A Bloomberg reporter found no one answering the door at a Reserve Trust office in Colorado on multiple business days.
Reserve Trust’s public website has shrunk to just two pages — a main page with a lengthy legal disclaimer and a privacy policy page. Google links to the company’s “about us” page and other pages now lead to error messages.
The Kansas City Fed had declined to comment on the status of Reserve Trust’s master account to Bloomberg News.
Other companies have been seeking Federal Reserve master accounts without success.
“Reserve Trust’s unique trust structure allows customers to store funds in custody accounts that are backed by Reserve Trust’s Federal Reserve master account, and to transfer funds via ACH, FedWire, SWIFT, and other emerging payment systems,” the company said in announcing the investment in August.
Dennis Gingold, a lawyer and
He said they were organized as a Colorado-chartered trust company, a kind of financial institution with robust consumer protections, not a fintech company, and during board meetings he told people not to call themselves a fintech.
“Obviously somebody didn’t like that instruction,” he said.QED Investors of Alexandria, Virginia, didn’t respond to phone calls and emails requesting comment in recent weeks.
— With assistance from Steve Matthews, Vincent Del Giudice and Allyson Versprille.
