Legislation in Congress to audit and remove some power from the Federal Reserve would threaten the central bank's independence, Chairman Ben Bernanke said this weekend.
Bernanke, the chairman of the Fed, said that proposals from Rep. Ron Paul (R-Texas) and Sen. Chris Dodd (D-Conn.) contained in separate bills would harm U.S. efforts to stabilize the economy.
"I am concerned...that a number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions," Bernanke wrote in an op-ed for the Washington Post to be published Sunday.
Bernanke referenced Paul's effort to audit the Fed (which Bernanke said would threaten the Fed's traditional political independence), as well as Dodd's financial overhaul bill, which would take a great deal of banking oversight authority out of the central bank's powers.
"These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States," Bernanke said. "The Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation."
The chairman chalked up the legislative moves against the Fed to populist anger at the bailouts undertaken by the U.S. in the past year. Indeed, Paul's legislation in the House attracted 313 cosponsors in the midst of other congressional shots at the Fed in recent months.
"Independent does not mean unaccountable. In its making of monetary policy, the Fed is highly transparent, providing detailed minutes of policy meetings and regular testimony before Congress, among other information," Bernanke wrote. "Now more than ever, America needs a strong, nonpolitical and independent central bank with the tools to promote financial stability and to help steer our economy to recovery without inflation."