The Republican-controlled Committee on Oversight and Government Reform approved a bill earlier today to allow for a congressional audit of the Federal Reserve’s monetary policy, a proposal Fed policymakers have opposed and likely faces a difficult path to final approval in the Senate. Under the bill, the Fed’s monetary policy deliberations could be subject to outside review by the Government Accountability Office.
While similar bills have garnered some support from Democrats in the past, they uniformly spoke against the current proposal during a meeting of the House of Representatives suggesting the current iteration would face stronger resistance from an increasingly polarized environment in Washington D.C..
The House previously passed similar versions of this legislation twice before in 2012 and 2014, with dozens of Democrats joining nearly unanimous Republican support. That said, those bills both died in the Senate and likely would have faced a Presidential veto from Obama had they survived anyway.
That said, Trump expressed interest in passing such legislation multiple times during the 2016 campaign cycle which means the 3rd time might just be the charm for Republicans.
It is so important to audit The Federal Reserve, and yet Ted Cruz missed the vote on the bill that would allow this to be done.
— Donald J. Trump (@realDonaldTrump) February 22, 2016
— Senator Rand Paul (@RandPaul) January 4, 2017
And while proponents of the bill argue that the Fed wields too much power over the U.S. economy with minimal oversight, opponents assert that Fed decisions should be informed purely by economic indicators and completely insulated from “political pressure”…and we presume those same opponents would argue that Yellen’s decision to wait until just after the conclusion of the 2016 Presidential election to start hiking rates had absolutely nothing to do with politics. Per Reuters:
Proponents of the measure argue that the Fed is too powerful and lacks sufficient oversight for its interest rate decisions. But Fed officials from Yellen on down, as well as other critics, have warned that such a policy could subject the Fed to undue political pressure and discourage it from taking unpopular steps for the good of the overall economy.
“We should not in any way hinder their independence,” said Representative Carolyn Maloney, a New York Democrat, echoing the sentiment of Fed policymakers who say they could come under political pressure to avoid making unpopular decisions such as raising interest rates to slow growth and control inflation.
The next step for the bill would be a floor vote by the entire House, where Republicans hold a solid majority, followed by a Senate vote that would be much more difficult given Republcans’ narrow lead.