Lawmakers Seek to Assert More Control Over Fed

The Federal Reserve Bank

JON E. DOUGHERTY, NEWSROOM AMERICA

A Texas lawmaker on Monday is set to unveil a new bill aimed at imposing reforms on the Federal Reserve, as the nation’s central bank faces increasing scrutiny from Congress.

Rep. Kevin Brady, R-Texas, vice chairman of the Joint Economic Committee who also holds a top spot on the Ways and Means Committee, will introduce the latest in a string of bills offered by the current 112th Congress that seeks to limit actions the Fed can take, The Hill newspaper reported on its Web site on Sunday.

Members of both parties have become increasingly critical of the Federal Reserve in recent months. Rep. Bernie Sanders, I-Vt., a lawmaker who normally caucuses with liberal Democrats, has also dramatically stepped up his criticism of the central bank in recent weeks.

“It’s a funny development,” Barry Bosworth, an economist with the liberal Brookings Institution, told the paper. “Historically, I would not have thought that there was a lot of antagonism between the Congress and the Federal Reserve.”

Experts say much of the new scrutiny comes from actions the Fed has taken during the recent financial crisis, which began in 2008 as the housing industry collapsed and the automobile industry teetered on the edge of bankruptcy.

When the Fed stepped in to mitigate the crisis, the actions it took and the scope of its power seemed to catch lawmakers off guard, the paper said.

“There’s a sense in which the actions the Fed took during the crisis surprised people,” onetime Fed economist Phillip Swagel, a former Treasury Department official under President George W. Bush, told the paper. “I think members didn’t quite understand the discretion that the Fed has.”

Republicans have been the most vocal in their criticism of the Fed. Texas Rep. Ron Paul, who is currently trying to secure the GOP presidential nomination, has been the most vociferous, regularly calling for an end to the central bank.

Paul took a break from the campaign trail earlier this week to return to Capitol Hill to spar with Ben Bernanke, head of the Federal Reserve.

In comments to Bernanke, who had been invited to appear before the House Financial Services Committee, Paul said the “grand experiment” with the Fed controlling the nation’s monetary policy was coming to an end.

“What we are witnessing today is the end stages of a grand experiment,” Paul said in opening comments, saying the Fed’s control of the monetary supply has been responsible for economic bubbles and has lowered the purchasing power of the dollar. As he has often in the past, Paul called for returning the U.S. to the gold standard.

“They’ve been debating currencies for hundreds if not thousands of years and they always end badly, they always return to market-based money, which is commodity money – gold and silver,” said Paul. “People keep arguing from the other side of this argument that [the Fed] is working, it’s doing well, and yet from my viewpoint and the viewpoint of the free market economists, all it is doing is building a bigger and bigger bubble.”

Backers of the Fed say that, in recent months, it has tried to become more transparent. For instance, the Fed is now telling markets when it will raise interest rates from near-zero, where they are now (by the end of 2014), and also recently made public its target of 2 percent inflation.

And last year, Bernanke began holding press conferences to discuss the Fed’s rationale for its policy decisions, as well as taking questions from the media, the Hill reported.


Copyright © 2012 Newsroom America


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