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 With Democrats controlling the Senate since the 2008 financial
crisis, the bank and its supporters have had the luxury of shrugging
off Fed-related laws from the Republican-controlled House of
Representatives.
But a Republican takeover of the Senate in November's midterm
elections would increase the chances of some of those measures
hitting the Senate floor, and changing the way the Fed functions.
Two Republican congressmen proposed a new bill on Monday that would
force the Fed to disclose information it has historically kept
private. That bill will be discussed at a hearing on Thursday by the
House Financial Services Committee, which is convening a panel to
discuss reforming the Fed.
"I think there's a chance of legislation that affects us," Richmond
Fed President Jeffrey Lacker, told reporters in Lynchburg, Va., last
month. "I think it's something that people within the system are
aware of. I just hope it's legislation that's constructive and
useful."
At least two of the Senate seats up for grabs feature candidates who
strongly support auditing the Fed, including Rep. Cory Gardner of
Colorado and Rep. Steve Daines of Montana. Polls show Daines well
ahead in his race while Gardner is neck and neck with his Democratic
opponent.
Bills under proposal include measures that would force the Fed to be
officially audited, conduct cost-benefit analysis before issuing
regulations, restrict the power of the Fed chair, and strip the Fed
of its low-unemployment mandate.
"While he believes the agency must remain independent, it should not
be immune from congressional scrutiny," said Alee Lockman, Daines'
communications director. Daines also believes Congress should change
the Fed's mission, Lockman said.
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The Fed has faced political pressure at various points in its
100-year history, starting with its inaction during the Great
Depression, and for its high-inflation policies of the 1970s. Bank
bailouts and the Fed's economic stimulus after 2008 also brought the
ire of politicians, and featured in the 2012 U.S. Republican
presidential nomination campaign.
Republican candidate Rick Perry famously said that then Fed Chairman
Ben Bernanke would be treated "pretty ugly" in Texas if he printed
money ahead of the election.
"Hopefully common sense will prevail. Applying cost-benefit analysis
to regulation is no different than what most regulatory agencies
do," said Austan Goolsbee, economics professor at the University of
Chicago, Booth School of Business. "Moving deeper into the auditing
of the Fed’s monetary policy decisions, however, puts the issue of
Fed independence right in the cross-hairs," said Goolsbee, a former
economic adviser to President Barack Obama and chairman of the
Council of Economic Advisers from 2010-2011.
(Editing by James Dalgleish)
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