GOP lawmaker unveils effort to roll back Fed's powers, mandate

A key House Republican unveiled legislation Monday aimed at overhauling how the Federal Reserve conducts its business, arguing it was time to put an end to the central bank's "monetary expansion."

Rep. Kevin Brady (R-Texas) is pushing sweeping legislation that would refine the Fed's mandate so it is exclusively concerned with tamping down inflation, as well as setting stricter rules for what the Fed can and cannot do with its economic powers.

Brady, the vice chairman of the Joint Economic Committee and a senior member of the House Ways and Means Committee, maintained that it was a mistake for Congress in 1977 to double the Fed's mandate so that it had to control inflation as well as maximize employment. While the tools the Fed has are designed to control price changes, it is ill-suited to boost employment, according to Brady.

"It makes no sense for Congress to charge the Federal Reserve to control what it cannot," he said at an event hosted by the American Enterprise Institute. "Except in the very short term, monetary policy can't boost real output and job creation. Instead, using monetary policy as a short-term tool to speed growth may actually harm the economy."

With the economy stalling and Congress deadlocked, the Fed has taken some unprecedented steps in recent years, including two huge bond-buying binges dubbed "quantitative easing," as well as providing an explicit timeline for future interest rate moves in several attempts to goose markets and get the economy moving along faster.

However, the lawmaker harbored no illusions that his bill would become law, at least not any time soon, but was hoping to begin a broader debate about the appropriate mission of the Fed.

"I don't see the president signing this bill," he said. "I really think this is a long-term discussion."

In addition to taking the Fed back to a single mandate, Brady's bill would require it to monitor price changes in a broad number of assets to hunt for developing bubbles, as well as force it to make explicit its policy as the financial system's lender of last resort.

In an attempt to pull control of the Fed away from power centers in New York and Washington, the policy-setting Federal Open Market Committee (FOMC) would now include all 12 presidents of regional Fed Banks from across the country. Currently, the FOMC consists of the president of the New York Fed, seven Fed governors nominated by the president, and a rotating group of four other regional presidents.

"There is more to the U.S. economy than Washington and New York," Brady said.

The bill would also speed up the release of transcripts from Fed meetings from five years to three, and would limit the assets the Fed can invest in to prevent it from "picking winners and losers."

The measure also takes aim at a long-time GOP target in the Consumer Financial Protection Bureau (CFPB). Brady's bill marks the latest GOP attempt to bring the CFPB's budget under the purview of appropriators, instead of its current funding arrangement under the Fed.

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