US Fed official rejects proposed audit bill
Updated: 2015-02-10 16:48
WASHINGTON - US Federal Reserve governor Jerome Powell on Monday refused a legislation proposal aimed to expand Congress' oversight of the Fed monetary policy, saying it would threaten the central bank's independence.
Republican Senator Rand Paul, a potential 2016 presidential candidate, last month reintroduced his "Audit the Fed" legislation with 30 co-sponsors that would subject the Fed's conduct of monetary policy to regular audits by Congress.
"I'm concerned about several troubling proposals that would subject monetary policy to undue political pressure and place new limits on the Fed' s ability to respond to future crisis," Powell, the lone Republican on the Fed board of governors, said in a speech at Catholic University of America in Washington.
Powell said experience in the United States and other advanced economies has shown that monetary policy is most successful when decisions are made independent of influence by elected officials.
"As recent US history has shown, elected officials have often pushed for easier policies that serve short-term political interests, at the expense of higher inflation and damage to the long-term health and stability of the economy," said Powell, who was appointed to the Fed board in 2012.
Powell also objected to proposals that would require the Fed to follow a specific equation in setting monetary policy and impose new limits on the central bank's long-held powers to provide liquidity during a financial crisis.
Powell defended the Fed's massive bond purchases and other extraordinary actions in response to the 2008 financial crisis. "The Fed has been transparent, accountable, and subject to extensive oversight, especially during and since the crisis. We have also taken appropriate steps since the crisis to further enhance that transparency," he said.
These unusual remarks suggest Fed officials see an increasing threat from Republicans to move the bill through Congress, as they now control both the Senate and the House of Representatives.
Several regional bank presidents have criticized the legislation as hugely "misguided". Fed Chairman Janet Yellen is scheduled to testify before Congress later this month and she will likely fight against the legislation.