A federal judge has rejected Wyoming-based Custodia Bank’s argument that it is entitled to a Federal Reserve master account and membership in the Fed.
Judge Scott Skavdahl of the District of Wyoming; Custodia’s motion for judgment was denied. On Friday, federal law does not require the nation’s central bank to give all eligible depository institutions access to its master account system, and evidence provided shows that the Federal Reserve does not require the Fed’s regional They wrote that they were not suggesting that they influence branches to deny them access to the Fed’s deposit account system. Apply for an account.
Mr. Custodia sued the Kansas City Fed in June 2022, alleging that the bank was taking too long to make a decision on his master account application. Master accounts give banks and depository institutions direct access to the Federal Reserve System rather than going through an intermediary bank. It amended its complaint to the Fed last February after the central bank rejected the application (the Fed later released a scathing report explaining its decision).
Mr. Custodia alleges in his amended complaint that the Federal Reserve Board illegally directed the Kansas City Fed to deny the application and that the Fed did not have discretion to deny the application from nonmember depository institutions. did.
Judge Skavdahl said in Friday’s order that the law does not require the Fed to grant applicants access to master accounts and that the evidence leans that the Kansas City Fed, not the board, made the decision. He said that
“Thus, unless the Federal Reserve has the discretion to reject or reject master account applications, state chartering laws would be the only layer of closure to the U.S. financial system,” the judge wrote. “And in that scenario, lax laws would attract businesses by reducing the burden of state licensing and giving minimally regulated institutions ready access to central bank balances and Federal Reserve services.” It is easy to predict a “race to the bottom” among states and politicians who want to do so.” ”
“Challenging the Federal Reserve’s aggressive strategy has always been an uphill battle, but Custodia Bank is committed to our vision of creating a secure, technology-enabled bank,” Custodia spokesman Nathan Miller said in a statement. We are continuing to work on it.” We are considering the court’s decision and all options, including appeal. ”
