House passes bill to overhaul the Fed

The Federal Reserve would be subject to a controversial public audit under legislation passed by the House on Thursday.

A bill authored by Rep. Bill Huizenga (R-Mich.) to overhaul how the nation’s central banking system operates passed on a largely party-line vote of 241-185. 

Conservatives have been pushing for years to “audit the Fed” in pursuit of promoting transparency. 

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“The Fed is not using a transparent monetary policy. And so because of this, greater transparency, greater accountability is necessary. Otherwise, we may soon awake to discover that our central bankers have morphed into our central planners,” said House Financial Services Committee Chairman Jeb Hensarling (R-Texas).

But the central bank maintains that opening up its deliberations to public scrutiny would politicize its decision-making process. 

“The Federal Reserve is an independent entity designed to be free from political pressures, and its independence is key to its credibility and its ability to act in the long-term interest of the Nation's economic health,” the Obama administration wrote in its veto threat against the bill.

Under the legislation, the Federal Reserve would be subject to a one-time audit from the Government Accountability Office (GAO). 

In a letter to Congress this week, Federal Reserve Chairwoman Janet Yellen warned that audits would hinder the central bank’s policymaking deliberations. 

“The bill would severely impair the Federal Reserve’s ability to carry out its congressional mandate and would be a grave mistake, detrimental to the economy and the American people,” Yellen wrote.

The measure further clarifies the “blackout period,” an agency policy which prohibits officials from speaking publicly about policy deliberations a week before and immediately following a Federal Open Market Committee meeting. 

It’s not the first time the House has passed “audit the Fed” legislation. In 2012, the House passed a long-sought bill from then-Rep. Ron Paul (R-Texas), the father of Sen. Rand Paul (R-Ky.), to audit the central bank. Eighty-nine Democrats at that time joined with Republicans in support of Paul’s bill.  

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