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Fed boosts audit-bill criticism as White House joins opposition
[NEW YORK] Federal Reserve officials stepped up their opposition to a legislative proposal that would grant Congress more control over monetary policy, as a top White House official signaled that such a law may face a presidential veto.
Republican Senator Rand Paul's bill "facilitates high- frequency harassment" of policy makers should it become law, Richmond Fed President Jeffrey Lacker told reporters on Tuesday in Raleigh, North Carolina. Dallas Fed President Richard Fisher told Bloomberg Radio "all this is all about is interfering with monetary policy making" by Congress.
The Fed, which has been battling criticism since bailing out big Wall Street banks during the financial crisis, says it is already extensively audited, with the exception of monetary policy decisions which are explicitly exempted from immediate congressional scrutiny by law.
Paul's bill, which would remove this protection, "would be dangerous," White House Council of Economic Advisers Chairman Jason Furman told Bloomberg Television. Furman said he would advise President Barack Obama to oppose the legislation. The Fed already is "enormously transparent" about how it makes policy, he said, echoing a speech on Monday by Fed Governor Jerome Powell.
Five Fed officials have spoken out in the past week against proposals to curb Fed independence, suggesting they sense an increasing threat from Republicans, who control of both chambers of Congress for the first time in eight years.
The bill by Mr Paul, a Kentucky lawmaker, would repeal existing law that exempts Fed monetary policy from Government Accountability Office audits. Twenty-nine Republican senators and one Democrat are co-sponsors, including Majority Leader Mitch McConnell, also of Kentucky, and Mike Crapo of Idaho, the second-ranking Republican on Senate Banking Committee, which must approve the bill before it would advance to the floor.
Fed officials complain that the word "audit" is a misnomer and the Paul bill would instead mean the GAO reviewing monetary policy decisions in real time. They also argue their deliberations are already transparent.
The policy-setting Federal Open Market Committee holds eight scheduled meetings a year and issues a statement at the end of each meeting. Fed Chair Janet Yellen holds a press conference after every other meeting.
FOMC statements can have major financial market impact and the panel's deliberations are highly confidential. Three weeks later the Fed releases minutes characterizing the FOMC's policy debate. A full transcript of each meeting is released with a five-year lag.
Senate Banking Committee Chairman Richard Shelby, who isn't a co-sponsor of the bill, declined to say in an interview Tuesday whether he would move Paul's bill through the committee. "We'll have hearings first," Mr Shelby said.
The Fed became a political lightening rod during the 2012 presidential election for public anger over Washington's rescue of large financial companies. Paul, a potential 2016 presidential contender, is the son of Ron Paul, a former Republican representative from Texas who has advocated abolishing the Fed.
Mr Powell said congressional efforts to extend political influence over monetary policy are "misguided" and "in violent conflict with the facts" because the Fed already is a transparent institution.
Mr Furman said he agreed with Mr Powell. "Congress shouldn't be telling the Fed what to do with monetary policy," Mr Furman said. "They're an enormously transparent institution already. Any additional legislation would be somewhere between superfluous and highly counterproductive."
Yellen told reporters at her press conference in December she'll speak out "forcefully" against monetary policy audits. She will deliver her semi-annual monetary policy testimony to Congress on Feb 24-25.
Elizabeth Warren of Massachusetts, the ranking Democrat on Senate Banking subcommittee on economic policy who has criticized the Fed for being too close to big banks, said she opposes the current version of Paul's bill.
"It promotes congressional meddling in the Fed's monetary policy decisions, which risks politicizing those decisions and may have dangerous implications for financial stability and the health of the global economy," Ms Warren said in a statement on Tuesday. She added that she will "continue to press for greater congressional oversight of the Fed's regulatory and supervisory responsibilities."