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 Interviews with current and former Fed staff, lawmakers and
lobbyists show that the central bank, led by Chair Janet Yellen, is
taking the audit threat seriously. Fed officials are making their
case for independence across Capitol Hill, reminding politicians of
the damage that can come from political interference into economic
policy discussions.
"They're sensitive to all of these issues," said Senator Jack Reed,
a Rhode Island Democrat on the Senate Banking, Housing and Urban
Affairs Committee. Reed said he had met with Fed Governor Daniel
Tarullo in recent weeks but would not say what they discussed.
The Fed is subject to various audits, including reviews by the
Government Accountability Office (GAO). But since 1978, its monetary
policy discussions have been legally exempt from a GAO audit and
some politicians say it is time to open up those deliberations to
more public scrutiny.
The Fed fears that a full GAO audit would reveal too much detail of
monetary policy decisions made by the Federal Open Market Committee.
Fed officials have said such exposure would complicate their public
communication, hurt their credibility and stoke market volatility.
 The central bank's stance on the issue was on display Wednesday,
when Yellen was asked if she was worried about the Fed's
independence. Yellen reiterated it was important to keep short-term
political interests out of Fed policy decisions.
"I certainly hope that (the GAO exemption) will continue and I will
try to forcefully make the case to why it is important," she said.
But Fed officials realize that boosting transparency has broad
support, which is expected to grow as both Republicans and Democrats
push for greater scrutiny over the central bank, its $4.4 trillion
balance sheet, its regulatory powers and its plan to begin raising
interest rates.
While it remains to be seen if the Senate will take up the audit
cause in 2015, Fed officials are actively lobbying.
KEY TASK
Loretta Mester, Cleveland Fed President since June, said she has met
with lawmakers since taking the job, discussing independence and
other topics. Meeting lawmakers will be a key task and regular part
of the job, she said.
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"It's important for the Fed to be independent in its setting of
monetary policy," said Mester, adding that the central bank is
accountable to Congress and the American people. "We want to be
non-political in terms of how we evaluate monetary policy because it
actually leads to better policymaking." Fed Chair Yellen and other
Fed officials, including half a dozen of its legislative affairs
staff, regularly meet with lawmakers on Capitol Hill. From March to
September, Yellen formally met or spoke with 15 U.S. lawmakers,
according to her meeting calendar, made public by the Wall Street
Journal through a freedom of information request.
That routine is likely to intensify next year, according to Mark
Calabria, a director of financial regulation studies at the Cato
Institute think tank.
"I would expect a lot more outreach on Yellen's part, a lot more
lunches, particularly to the Senate banking committee and the new
members."
In September, the House passed a bill that would require a full GAO
Fed audit, reviving a 2012 measure. The "Federal Reserve
Transparency Act," passed the House by a 333-92 vote in September,
but died in the Senate.
"The likelihood of re-introduction of the audit bill is essentially
100 percent," said Calabria, a former staffer for Alabama Senator
Richard Shelby, who is expected to take over as new Senate banking
chair. "The question is whether both the House and Senate pass it in
its current form. Certainly the odds of it passing have greatly
increased."
(Additional reporting by Ann Saphir and Jonathan Spicer; Editing by
Tomasz Janowski)
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