Senate Majority Whip Dick Durbin (D-Ill.) on Wednesday said Republican attempts to offer advice to the Federal Reserve ahead of its two-day meeting on monetary policy were “wrong-headed” and represented an unwarranted political intrusion on the independent agency.
Speaking on the Senate floor, Durbin cited a letter sent by House and Senate Republican leaders on Monday to Federal Reserve Chairman Ben Bernanke saying the Fed should not approve any “further intervention” in the U.S. economy.
Top GOP leaders from both chambers sent a letter to Bernanke on Monday, highlighting “serious concerns” about further intervention from the Fed and arguing that previous efforts have done more harm than good.
The letter was signed by House Speaker John Boehner (Ohio), House Majority Leader Eric Cantor (Va.), Senate Minority Leader Mitch McConnell (Ky.) and Senate Minority Whip Jon Kyl (Ariz.).
Durbin quoted a former Federal Reserve official who said it is “outrageous” that the Fed would receive “direct political communications from Republican leaders.”
While Durbin seemed to imply that congressional outreach to the Fed is unheard of, Durbin himself wrote to Bernanke last February, after the chairman questioned whether the new bank interchange fee law would effectively exempt small banks. He said Bernanke’s testimony before Congress “echoed the financial industry’s talking points and failed to acknowledge several critical realities,” and called on the Fed to be fully informed.
Credit card issuers charge merchants interchange fees for transactions done through their cards. In his letter to Bernanke, Durbin called on the Fed to see through arguments that large financial institutions were taking action in opposition to reforms that would lower these fees.
“For the sake of Main Street American consumers and businesses, we need the Federal Reserve to understand and address the non-competitive practices of our largest financial institutions,” Durbin wrote.
The Fed at the time was drafting rules on the interchange fee change, part of the Dodd-Frank financial reforms, and had sought public comment, although Durbin’s critique fell outside that effort and came after Bernanke had offered testimony on the topic.
The Federal Open Market Committee (FOMC) began a two-day meeting on Tuesday, and on Wednesday afternoon will announce any monetary policy decisions it has made. While most economists say there is little else the Fed can do to help the economy, given that interest rates are already essentially at zero, Durbin criticized Republicans nonetheless for encouraging the Fed to ignore the struggling economy.
“So what is the message of the Republican leaders to the Federal Reserve Board?” he asked. “Their message is clear and simple: Do nothing. Stand by the sidelines and watch this economy languish.”
—Peter Schroeder contributed.
This post was updated at 1:18 p.m.