Representative Jeb Hensarling, chairman of the House Financial Services Committee, issued subpoenas to the Treasury Department and the Federal Reserve Bank of New York for documents described as contingency plans to avert a default in case Congress failed to raise the debt ceiling.
Hensarling, a Texas Republican, also sent a subpoena to the Justice Department for documents related to financial institutions considered “too big to fail.”
“These three government agencies have chosen to unlawfully obstruct, delay and withhold information that our committee and the taxpayers have the right to know,” Hensarling said in a statement Monday in Washington.
Hensarling, 57, is using the power of his committee to demand more transparency from the Obama administration. He is separately seeking more accountability from the Fed over a 2012 leak of confidential monetary policy information, which is the subject of a Justice investigation.
The Treasury drew up plans in 2013 to pay holders of U.S. securities in case Congress failed to raise the debt ceiling, according to a 2014 letter from Hensarling to Treasury Secretary Jacob J. Lew that was obtained by Bloomberg.
Whether the U.S. could pay some of its obligations but not others was the subject of heating sparring between Lew and Republicans in Congress during a standoff over the debt ceiling in 2013. Republican lawmakers argued that that nation could continue to pay holders of Treasury bonds, while Lew said such a strategy wasn’t feasible.
In the letter, Hensarling cited documents that he said detail “the steps the Department would take to successfully carry out any directive to prioritize payments on Treasury bonds if the debt ceiling were not raised.”
Hensarling said the documents “raise the question whether there was an adequate factual basis” for Lew’s earlier testimony to Congress about the ability to “prioritize” payments.
In October 2013 testimony to the Senate Finance Committee, Lew said that automated systems write about 80 million checks a month, and “you cannot go into those systems and easily make them pay some things and not other things,” such as payments to veterans and retirees.
The New York Fed also drew up plans to “minimize market disruptions if the Department decided to partially delay Treasury bond payments,” according to Hensarling’s letter.
In October 2013, Congress delayed action on raising the debt ceiling until the day before the borrowing authority was scheduled to lapse. The four-week fiscal standoff preceding the action caused a 16-day government shutdown and prompted Fitch Ratings to warn it might lower its AAA rating for the U.S.
While the Treasury in May 2014 allowed the committee to review the debt-ceiling records in private, the panel’s staff hasn’t been able to get full control of the records, according to the statement. The Treasury also hasn’t given assurances “that it produced all known responsive records,” the panel said.
The committee said the Treasury also failed to produce records related to a money laundering investigation of HSBC Holdings Plc.
The Treasury, in a statement Monday, said: “We continue to be willing to work with the Committee to get it the information it needs and have cooperated extensively with the Committee on these issues. We regret that the Majority has decided to take this unilateral step.”
The Treasury later added: “There is no option other than raising or suspending the debt limit that could reasonably protect the American economy from very serious harm.”
A New York Fed spokeswoman declined to comment.
Hensarling said his panel subpoenaed information from the Justice Department “that would help it assess whether the Dodd-Frank Act ended the phenomenon of ‘too big to fail’ or whether new legislation is needed,” according to the statement.
Emily Pierce, a Justice Department spokeswoman, said in an e-mail that the department had made “great efforts” to “accommodate the committee’s request” through letters, briefings and testimony and “will continue to work cooperatively with the chairman.”
In March 2013, Hensarling requested records about the department’s decisions “not to prosecute large financial institutions based on the potential impact that such a prosecution may have on the national economy.”
The request came after then-Attorney General Eric Holder testified before the Senate Judiciary Committee that the size of the biggest banks hindered his ability to prosecute them, according to the statement from Hensarling’s panel.
“This gets to the heart of a key statement about Dodd-Frank, that there is no more too-big-to-fail,” said Norbert Michel, a research fellow at the Heritage Foundation in Washington. “Shedding light on what DOJ did and did not do would be great for addressing that.”
Hensarling led House opposition to the $700 billion bank bailout in 2008, calling it a “slippery slope to socialism,” and voted two years later against the Dodd-Frank Act to overhaul financial regulation.
In a letter to Hensarling, Maxine Waters, the top Democrat on the committee, protested his decision to issue the subpoenas without consulting other members of the panel.
“It is characteristically undemocratic to now use your newly vested unilateral authority and issue subpoenas in order to eliminate the ability of members of this committee -- both Democrat and Republican -- to openly debate the merit and necessity of such subpoenas,” she wrote in a letter made public by the California Democrat.
Waters also said the committee had already received information and access to documents from the three agencies.