Bill Would Adjust Federal Reserve’s Structure, Give Congress Greater Authority Over It
In a letter last week to House Speaker Paul Ryan (R-WI) and Democratic leader Nancy Pelosi (D-CA), Federal Reserve Chair Janet Yellen criticized Rep. Bill Huizenga’s (R-MI) proposed Fed Oversight Modernization and Reform Act, which could make changes to the Federal Reserve’s structure and authority. In the letter, Yellen wrote that “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,” the Wall Street Journal reported. She said that Fed officials also worry about the review of monetary policy decisions, which would be permitted with the new bill, because it would make the central bank more susceptible to pressure: “The provision is based on a false premise – that the Federal Reserve is not subject to an audit,” she said. Indeed, Yellen said it would upend a “fundamental principle” of central banking, The Hill reported. The Hill says the rule, “which would have the Fed set policy following a formula based on economic data,” would “effectively hand the keys for monetary policy to Congress.” Bloomberg News reported that following Yellen’s letter, the White House said it “‘strongly opposed’ the measure and cautioned that Obama’s senior advisers would recommend he veto the bill if it reached his desk.” Bloomberg said the measure would require the Federal Reserve “to establish a mathematical formula that would dictate how the Federal Open Market Committee adjusts policy, and would give the Government Accountability Office responsibility for determining whether the adopted rule met the legislation’s criteria.” However, the measure faces “a difficult path to ever becoming law,” because assuming a House passage, Senate Republicans would need Democrats “to overcome procedural hurdles.” Additionally, President Obama’s advisers have recommended that he veto the bill.
What This Means For Small Businesses
Adding more Congressional oversight to the traditionally-independent Federal Reserve system would be damaging to the financial body’s ability to craft effective fiscal policies for the nation, including its small businesses. The Federal Reserve must be allowed to continue its independence without fear of politicized repercussions from members of Congress.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.