Republican Senator Pat Toomey is demanding an explanation from the Federal Reserve Bank of Kansas City after it allegedly revoked a coveted master account that was initially granted to fintech company, Reserve Trust.
Toomey said that this master account granted the Colorado-based fintech access to the Fed’s payment services, which is considered a rare feat for a fintech.
In the letter, Toomey did not reveal how he learned about the account’s revocation. However, he added that this development only adds more ambiguity on how the Fed processes and approves master accounts.
The Fed itself is currently in the middle of revising the application process, proposing instead for a tiered review process that gives less-rigid scrutiny to federally insured institutions, and a stricter review for firms that are uninsured and those not under bank regulation.
The Kansas City Fed initially declined Reserve Trust’s application for a master account in 2017. A year later, it granted the master account application after the firm modified its business model.
The approval was marred with controversy because Sarah Bloom Raskin, a former Fed governor, was part of Reserve Trust’s board. Toomey claimed that Raskin, who was previously nominated by President Joe Biden to another Fed post, unfairly influenced the result of the firm’s application.
Raskin has denied all allegations.
The Kansas City Fed and Reserve Trust could not be reached for comment regarding the matter.