(Extensions of Remarks - July 31, 2012)

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[Extensions of Remarks]
[Page E1351]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                               speech of

                          HON. SPENCER BACHUS

                               of alabama

                    in the house of representatives

                         Tuesday, July 24, 2012

  Mr. BACHUS. Mr. Speaker, I rise in qualified support of H.R. 459, the 
Federal Reserve Transparency Act of 2012. Before addressing the merits 
of the legislation, I want to pay tribute to its author, the gentleman 
from Texas, Mr. Paul, who serves as the Chairman of the Financial 
Services Committee's Domestic Monetary Policy Subcommittee. His 
tireless advocacy on monetary policy issues and his crusade for a more 
open and transparent Federal Reserve have been hallmarks of his 
congressional career. With that career coming to a close at the end of 
this Congress, it is appropriate that the House consider this bill.
  H.R. 459 is bipartisan legislation which will help promote greater 
public understanding of the Federal Reserve's operations and the impact 
of its decisions on average Americans. A more transparent central bank 
will be more accountable for its decisions, which have broad 
consequences for the American economy, including consumers, savers and 
small businesses. By de-mystifying the Federal Reserve, we can enhance 
public confidence in the institution and help address some of the 
legitimate questions the American people have in the wake of the 
extraordinary measures that the Fed took at the height of the financial 
crisis, which have resulted in a tripling of the size of the Fed's 
balance sheet since 2008.
  To his credit, Chairman Bernanke recognized the need for the Fed to 
improve the transparency of its operations early on in his tenure, and 
under his leadership, the Fed has made significant strides in this 
area. Among other initiatives, the Chairman now holds quarterly press 
conferences, giving the American public an insight into his thinking on 
the state of the economy and the basis for monetary policy judgments 
that would have been unheard of under past Fed Chairmen. The Fed has 
also achieved a greater level of clarity in policy statements issued by 
the Federal Open Market Committee, and has become much more explicit in 
its targeting of inflation.
  While these are welcome developments for which Chairman Bernanke 
should be commended, in a representative democracy, maximum 
transparency is essential to maintaining the trust of the governed. If 
we err, it must be on the side of the public's right to know. By 
removing certain statutory limitations on the current authority of the 
Government Accountability Office (GAO) to audit the Fed's operations, 
H.R. 459 builds on the reforms that Chairman Bernanke has instituted 
and will make for a more open and accountable central bank, which is a 
goal we all share.
  Having said that, no legislation is perfect, and there is one aspect 
of this bill that, if not carefully implemented, runs the risk of 
undermining the Fed's political independence. Specifically, the bill 
would authorize the GAO to audit the Federal Reserve Board's 
``deliberations, decisions, or actions on monetary policy matters,'' 
thereby removing a limitation that was imposed on the GAO when it was 
first given statutory authority to audit the Fed in 1978. Proponents of 
expanding the scope of the GAO's audit authority cite the 
unconventional policy interventions carried out by the Fed in recent 
years in its attempt to stabilize the financial system and stimulate 
the economy as justification for a more robust congressional role in 
overseeing the central bank's operations. It should be noted, however, 
that the inclusion in the Dodd-Frank Act of reforms first proposed by 
Financial Services Committee Republicans that significantly curtail the 
Fed's emergency lending authorities under section 13(3) of the Federal 
Reserve Act go a long way toward addressing concerns about the Fed's 
ability to conduct rescues of individual financial institutions without 
the review and approval of Congress.
  As a general matter, I worry that the level of congressional scrutiny 
authorized by H.R. 459 may, if not exercised cautiously and 
responsibly, be incompatible with the need to insulate the Fed from 
political pressures and ensure that its decisions are based on sound 
economic principles rather than on jaw-boning from Capitol Hill. I am 
therefore sympathetic to Chairman Bernanke's argument--which he made in 
recent testimony before the Financial Services Committee--that a 
central bank that operates free of such political influence is likely 
to produce better economic outcomes and a more stable interest rate 
  Indeed, the danger of allowing political considerations to guide 
monetary policy judgments was on full display at a recent hearing in 
the other body, where one of the Senators, citing Congress' inability 
to reach consensus on how to jump-start our anemic economic recovery, 
loudly urged Chairman Bernanke to ``get to work'' and implement a more 
aggressive monetary easing. This kind of rhetoric underscores the need 
for the GAO to exercise its expanded audit authority under H.R. 459 
prudently, and to resist any efforts by Members of Congress to use this 
new tool to influence decisions on monetary policy. Failure to protect 
the central bank's independence from such political pressure will have 
dire consequences for our economy and for the legitimacy of the Federal 
Reserve as an institution.
  Concerns about the scope of GAO's audits of monetary policy 
deliberations were never aired in the Financial Services Committee 
because of a decision by the House Parliamentarian to refer H.R. 459 
exclusively to the Committee on Oversight and Government Reform. This 
referral, which Dr. Paul and I challenged at the time in extensive 
written correspondence and in meetings with the Parliamentarians, 
ignored decades of past precedents recognizing the Financial Services 
Committee's jurisdiction over legislative proposals affecting the 
Federal Reserve's conduct of monetary policy. While the Parliamentarian 
ultimately granted the Financial Services Committee a sequential 
referral of H.R. 459 after it had been reported to the House and 
scheduled for floor consideration, the initial referral to the 
Committee on Oversight and Government Reform short-circuited the 
legislative process and denied Members of the Financial Services 
Committee, including Dr. Paul, an opportunity to fully debate the 
important issues of Federal Reserve transparency and independence 
raised by this legislation.
  Again, I commend Dr. Paul and Chairman Bernanke for their efforts to 
bring greater transparency to the Fed's operations.