At the July 10 hearing, Legislation to Reform the Federal Reserve on Its 100-year Anniversary, the Federal Reserve Accountability and Transparency Act (HR 5018) was discussed, legislation which would require “the Federal Reserve to provide the Congress with a clear rule to describe the course of monetary policy.”
The act would also require the Fed to conduct cost-benefit analysis, require transparency on bank stress tests and international financial regulatory negotiations, and would order the Fed to disclose the salaries of highly paid employees.
An opponent of the measure, Dr. Simon Johnson, a professor of Economics at the Massachusetts Institute of Technology, likened the Fed being audited by the Government Accountability Office (GAO), which is the government’s auditing office, to a “police state.”
In response, Rep. Campbell said, “The GAO? Having the GAO audit a government agency is a police state?”
“The police state is the government they’re auditing, that’s the police state,” Campbell said. “The police state is the IRS, the police state is the EPA, the police state is all them. That’s the police state. Auditing is not a police state. Now you’re really ticking me off.”
Rep. Bill Huizenga (R-Mich.) who introduced the Act, said the Fed must be accountable to the American people.
“Over the past several years, the Federal Reserve has been gaining unprecedented power, influence, and control over the financial system in Washington, while remaining shrouded in mystery to the American people,” Huizenga said. “The standard operating procedure cannot continue. We must lift this veil of secrecy and ensure that the Fed is accountable to the people’s representatives.”
Huizenga’s statement was echoed by the chair of the committee, Rep. Jeb Hensarling (R-Texas).
“Most recently we have seen a radical departure from the historic norms of monetary policy conduct from an unprecedented use of 13(3) exigent powers, to select intervention and distinct credit markets, to the facilitation of our sustainable national debt to a blurring of the lines between fiscal and monetary policy all of which presents large and unwarranted risk to our economy,” said Hensarling.
But opponents of the measure called it “tedious,” “expensive,” and like “audit the fed on steroids.”
“This legislation is a concession to the opponents of the Dodd-Frank Wall Street Reform Act,” she said. “By making the Fed’s rulemaking more tedious, more expensive, and subject to endless legal challenges than those who do not agree with these decisions. Unfortunately, this proposal follows a Republican roadmap we have seen too often on this Committee.”
Similarly, Rep. Carolyn Maloney (D-N.Y.) said, “This bill also goes far beyond the ‘audit the fed’ bill that this House voted on last Congress. As one newspaper described it, it is ‘audit the fed on steroids.’”
“While it’s true that this bill doesn’t force by law the Fed to follow a particular formula for interest rates, it does attempt to bully the Fed into following the Republicans preferred monetary policy,” said Maloney.
Huizinga stood by the bill and questioned the constitutional standing of his colleagues, saying, “I cannot figure out why so many of my colleagues are willing to hand over their constitutional standing, I would argue their constitutional duty, to fulfill oversight responsibility.”