Sen. John Cornyn (R-Texas) on Monday introduced legislation that would task a new commission with recommending changes to the Federal Reserve.
Cornyn's bill, S. 1895, would create a Centennial Monetary Commission to review the central bank and examine how the Fed has affected the performance of the economy since its creation in 1913. It would examine how Fed policy affects output, employment, prices and financial stability.
The bill comes at a time of heightened criticism and worry about the Fed's actions. In response to the financial crisis of 2008, the Fed bought up federal housing debt, and started buying long-term Treasury debt in 2009 in order to help keep interest rates low to spur consumption and growth.
In 2010, the Fed bought another $600 billion in Treasury debt, and more than doubled those purchases in 2011 and 2012.
In late 2012, the Fed started buying $40 billion worth of mortgage-backed securities each month, and then started buying $45 billion a month in long-term Treasury debt. And just last month, the Fed said it would slow its bond buying program by $10 billion a month, the first sign of the long-anticipated "tapering" of the Fed's quantitative easing program.
Many Republicans have accused the Fed of dramatically increasing the money supply in order to jolt the economy — effectively favoring its mandate to ensure maximum employment over its other mandate to ensure price stability. Congress assigned this dual mandate to the Fed in 1977, but the creation of Cornyn's Commission raises the prospect of altering that mandate.
Under the bill, the Commission would have to submit a report to Congress on its findings by the end of this June, along with any recommendations for altering the Fed policies.
Six members of the Commission would be comprised of current members of key congressional committees. They would be the chair and ranking members of the Joint Economic Committee, the House Financial Services Committee, and the Senate Banking Committee.
Six others would be appointed — two by Speaker John Boehner (R-Ohio), one by Minority Leader Nancy Pelosi (D-Calif.), two by Senate Majority Leader Harry Reid (D-Nev.), and one by Senate Minority Leader Mitch McConnell (R-Ky.).
Two other non-voting members would be appointed by the Secretary of the Treasury, and the Federal Reserve Board Chair.