In this report, FedFin revisits our forecast for the Federal Reserve after the mid-term election (see Client Report FEDERALRESERVE6). We said then that we thought the FRB would face unprecedented pressure, a sentiment the Board clearly shares in light of its recent, dramatic public-outreach campaign.  However, quantitative easing is far from the Fed’s only challenge.  The recent disclosures mandated by the Dodd-Frank Act will, FedFin concludes, exacerbate the already-formidable institutional challenges facing the U.S. central bank in the next Congress, with its overall governance structure and discount-window operations at particular risk of a substantive rewrite.  These disclosures will also influence the outcome of numerous GAO audits mandated in the new law (see FSM Report RESCUE65), putting short-term pressure on the Board. Pressures already evident in GOP opposition to the pending nomination of Peter Diamond to the Board will also impede additional nominations, including that of a vice chair to address supervision as the new systemic framework is crafted.  Another run at the FRB’s dominant systemic-risk role (see FSM Report SYSTEMIC29) is, FedFin thinks, unlikely, not impossible.  However, the Fed isn’t the only institution to come under new pressure to post these disclosures; many non-banks that had hoped to avoid systemic designation will find this more difficult in light of their deep draws from the Board’s various emergency facilities.

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