by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Members of the central bank, the White House and the private sector are speaking out this week against Paul’s legislation, which would subject the Fed’s monetary policy deliberations to a Government Accountability Office audit.
But with resentment of the 2008 bailouts still strong, Paul’s bill is not the only legislation lawmakers are considering that would rein in the Fed and limit its discretion to conduct monetary and regulatory policy.
And the threat is real: Only last month, President Obama signed into law a measure that requires at least one person on the seven-member Federal Reserve Board of Governors to have experience in community banking. That bill became law over Fed Chairwoman Janet Yellen’s objections when it was attached to a larger piece of legislation relating to a terrorism insurance program that the White House considered a necessity.
1. Audit the Fed
Paul’s legislation received a major boost Tuesday when Sen. Richard Shelby, R-Ala., expressed support for it and suggested that the Banking Committee that he heads would hold hearings on it.
“I, at one point in my career, was a big defender of the Fed. No longer… They ought to have transparency,” Shelby said, according to the Wall Street Journal. …
… 2. The FRAT Act
Favored by conservative Republicans in the House, the Federal Reserve Accountability and Transparency Act, or FRAT Act, would have a similar effect to that of the Fed audit, namely increasing oversight of the Fed’s monetary policy.
The FRAT Act would require the Fed to establish a rule guiding its monetary policy, explaining how it would change interest rates to respond to increases or decreases in inflation or unemployment. If the Fed departed from the rule, it would be subject to an immediate GAO audit and would have to report to Congress on why it deviated from the rule.