GOP uses Fed standoff to build case for reforms

House Republicans are using their gripes about the Federal Reserve’s responsiveness to Congress to bolster their argument the central bank needs tighter restrictions.

Eyeing a host of potential reforms to the Fed, Republicans made the case Tuesday that the Fed’s insistence on political independence serves as shield from oversight and policy changes from lawmakers.

Frustrated with how the Fed has responded to congressional inquiries regarding a 2012 leak of sensitive private information, members argued for further Fed restrictions one day before Fed Chair Janet Yellen is set to testify before Congress.


“Opacity reigns supreme within its walls,” said Rep. Sean DuffySean DuffyEx-Rep. Frelinghuysen joins law and lobby firm Wisconsin state senator wins GOP primary in race to replace Duffy The Hill's Morning Report - In Nevada, bets on Sanders, eyes on Bloomberg MORE (R-Wis.), chairman of the House Financial Services subcommittee that discussed the Fed in a hearing.

“The Fed’s clamor for independence is its underpinning for circumventing any sort of congressional accountability,” he added.

While GOP lawmakers have long been critical of Fed policy, both in terms of monetary policy and financial regulation, House members have become frustrated of late with even their ability to communicate with the central bank.

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) accused the Fed in June of “willful obstruction” of his panel’s probe into the leak, which saw an investment advisory firm detail private Fed deliberations one day before those details were made public.

Citing its own internal investigation and an ongoing criminal probe by the Justice Department, the Fed has refused to hand over all documents tied to the matter, even after receiving a subpoena from Hensarling’s panel.

Now, that standoff is fueling a fresh round of calls for changes to how the Fed operates, ranging from subjecting its monetary policy deliberations to strict congressional oversight, or even requiring the Fed to adhere to an explicit rule tying economic conditions to interest rates.

The Fed has staunchly resisted any suggested reforms offered by lawmakers, arguing the central bank operates fine and needs broad deference to do what it is necessary for the economy, free of political interference.

And backers of the central bank point out that the Fed itself has taken steps to boost transparency over the years. The Fed did not even inform markets of interest rate changes until 1994, and agreed to hold press conferences in 2011 following some policy meetings. Tying the Fed’s hands via specific rules or extreme oversight could make it less effective, they warned.

“I would advise you to leave well enough alone,” said Alice Rivlin, a senior fellow of economic studies at the Brookings Institution.

Yellen will appear before the House Financial Services Committee Wednesday to deliver her semiannual report on monetary policy and the economy.