A bill, which proponents say would lift the shroud of secrecy surrounding the operations of the Federal Reserve, passed the House Oversight Committee Tuesday en route to a vote by the full House.
Authored by Rep. Thomas Massie (R-Ky.), the Federal Reserve Transparency Act (H.R. 24) sailed through the House panel's deliberations, despite some concerns that the bill might compromise the Fed’s independence and subject the nation’s central bank to the short-term political concerns of Congress.
Massie's press secretary, Lorenz Isidro, told AMI Newswire Thursday that the bill has yet to be scheduled for a vote by the full House. But a similar bill, sponsored by former Rep. Paul Broun of Georgia in 2014, took six to seven weeks before reaching the House floor for a vote, Isidro said.
On a voice vote, the House panel approved the bill to remove past restrictions on the Government Accountability Office (GAO), the congressional watchdog agency that keep tabs on government spending, when it audits Fed operations.
Under Massie’s bill, the GAO would have the power to examine Fed transactions or agreements with foreign banks and foreign governments; to review Fed deliberations on monetary policy; and to investigate transactions made by the Fed’s Open Market Committee (FOMC), which examines risks to economic growth and price stability.
“Only a full audit can demonstrate that the Fed makes decisions independently of the political whims of the president and independently of the profit goals of commercial banks,” Massie said during Tuesday’s hearing.
Free-market-oriented policy organizations such as FreedomWorks and the Campaign for Liberty welcomed the passage of what has been termed the “Audit the Fed” bill.
“It puts sunshine where there is currently none,” Jason Pye, director of communications and director of justice reform for FreedomWorks, told AMI Newswire.
“Of course, lifting the veil of secrecy from the Federal Reserve is really why central bankers like Ben Bernanke and Janet Yellen oppose this bill.”
Norm Singleton, president of the Campaign for Liberty, said in a prepared statement, “I urge Speaker Paul Ryan to swiftly bring Audit the Fed to the floor for a full vote so that the American people can finally know what the Federal Reserve is doing with our money and our economy.”
Not everyone agrees that opening up the Fed to greater congressional scrutiny is a good idea, however. Bernanke, the former Fed chairman, said in a blog post earlier this year that the GAO currently has substantial powers to review Fed operations. As an example, Bernanke cited GAO reviews of emergency lending programs during the financial crisis that began in 2008.
“The principal effect of the bill would be to make meeting-by-meeting monetary policy decisions subject to congressional review and, potentially, congressional pressure,” he wrote.
At least one member of the House Oversight Committee agreed with Bernanke. Rep. Elijah Cummings (D-MD) said Massie’s bill would make far-reaching and unprecedented changes to how the Fed is regulated and degrade the central bank’s independence.
In turn, the Fed could become forced to respond more to short-term political considerations rather than keeping its sights on long-term economic stability, some bill opponents argue.
Pye responded that, “The central bank is already influenced by politics and responds to the crony class as much as most members of Congress.”
Other bill supporters argue that the only way for the American people to understand what the Fed does and how it makes decisions is through thorough audits and analysis of its operations.
Massie and others have noted that over the past century, the value of the dollar has declined by 95 percent, and contend that scrutiny of the Fed’s management has been too limited.
“The Federal Reserve holds a significant amount of power over the world economy, from the ability to print more money to increase or decrease interest rates,” Pye said. “This is an institution that affects every American on a daily basis, just as much as the actions of Congress.”