'Audit the Fed' to Make Comeback
“Audit the Fed” is here to stay.
The movement to bring greater transparency to the Federal Reserve will be in full force in the new Congress, with Republican lawmakers in both the House and the Senate eager to reintroduce legislation in early 2015 requiring a full “audit” of the central bank.
In the House, Rep. Thomas Massie (R-Ky.) is taking the torch from outgoing Rep. Paul Broun (R-Ga.), whose “Audit the Fed” bill sailed through the House this year with bipartisan support. Across the Capitol, another Kentucky Republican — Sen. Rand Paul — is vowing to introduce the bill again, with renewed hope that the GOP takeover of the Senate will boost its chances of getting a floor vote in the next Congress.
Both Massie and Paul want to get the ball rolling right away. Massie plans to release the bill early in the new Congress, while Paul said in a brief interview this week that his will likely be dropped in January.
Proponents of “Audit the Fed” believe the proposal is ripe for a potential breakout moment next Congress — with Senate Minority Leader Mitch McConnell’s ascendance to majority leader in January, the bill has a better chance of being approved by both chambers of Congress for the first time.
“I think our odds keep improving,” said Massie, who has a personal relationship with Paul. “His profile will be raised as he runs for president, which bodes well for this bill, and his relationship with Sen. McConnell I think bodes well for this bill in the Senate.”
McConnell spokesman Don Stewart said in an email Wednesday that while they have not announced a schedule for next year, the senator “supports the bill, he’s a co-sponsor.”
The concept of auditing the Fed has gone from a little-entertained fringe idea to a widely backed proposal aimed at reining in the central bank in recent years. The legislation would require the Government Accountability Office to conduct a full examination of the Fed’s actions, including its monetary policy decisions.
Originally crafted by former GOP Texas Rep. Ron Paul — father of the Kentucky senator — “Audit the Fed” now has support on both sides of the political aisle. The House approved Broun’s bill in September, 333 to 92.
Fed officials, including Chair Janet Yellen, strongly oppose the bill.
In her first congressional hearing after being named Fed chair in February, Yellen stressed to lawmakers the importance of the central bank’s independence and suggested that the “Audit the Fed” bill would burden the Fed with “political pressures.”
The concern is that putting the central bank’s monetary policy decisions under the microscope would make Fed officials beholden to external pressures, when the bank is meant to operate as an independent agency.
“I don’t believe that the Federal Reserve is in any way corrupt, and I believe that the confidence of markets in the Federal Reserve and in our monetary policy making would not be enhanced by that type of audit,” she said.
But for supporters of the legislation, there has never been a more critical time to strengthen oversight of the central bank.
Fed critics have long been wary of what they view as the bank’s oversized role in the economy. The Fed last month announced the end of the third round of its controversial “quantitative easing” asset-purchase program — one of the drastic actions that the central bank took after the financial crisis to keep long-term interest rates low in an effort to boost boost investing and spending.
The newly GOP-controlled Congress will likely put greater emphasis on scrutinizing the Fed’s actions next year, as it faces the challenge of winding down its massive balance sheet and regulating the financial sector.
“It’s absolutely imperative that we get a transparent, full audit of the Fed so the American public can know what going on with this entity,” said Broun, the Georgia congressman who was defeated in the Republican primary for the seat of retiring Sen. Saxby Chambliss. “Members of Congress are more and more beginning to see how critical it is.”