The House Financial Services Committee wants to rein in the Federal Reserve, the Washington Wire reports.
On Thursday, the committee held a discussion considering the addition of the “mathematical formula” rule — a rule that the Fed has signaled it strongly opposes.
For Chairman Rep. Jeb Hensarling, however, stipulating a rule in advance would render the Fed “free from political micromanagement,” noting that the Fed’s “independence and discretion must be paired with appropriate transparency and accountability.”
In addition, the Fed would face pushback on its regulatory efforts, since new rules would be subject to cost-benefit analysis before coming into effect. The chair of the Federal Reserve would also have to testify before the House Financial Services Committee twice as often, totaling four times a year.
The opposite view came from California Democratic Rep. Maxine Waters, who argued that regulating interest rates by mathematical formula would hurt the Fed’s ability to quickly respond to changing conditions, and would effectively “cripple the Federal Reserve’s ability to promote growth, stabilize the economy and, at times of extraordinary crisis, take decisive action to avoid an economic collapse.”
The bill, known as the Federal Reserve Accountability and Transparency Act, provides that if the Fed deviates from the proposed mathematical rule, the Government Accountability Office is permitted to conduct an audit.
“Over the past several years, the Federal Reserve has gained unprecedented power, influence, and control over the financial system while remaining shrouded in mystery to the American people,” said Michigan Republican Rep. Bill Huizenga.
“An independent Fed does not have to be an opaque Fed,” added Illinois Republican Rep. Randy Hultgren.
Even if the bill garnered support in the Republican-dominated House, it would face a difficult path in the Democratic-controlled Senate
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