It is no secret that limited-government proponents dislike the Federal Reserve, or “the Fed,” and the influence that this central bank wields. It attempts to “play God” in our economy by its control over monetary policy and almost always does far more harm than good. What could not be more secretive currently, though, is the way that the Fed operates. Fortunately, there is significant support in Congress for a bill -- the Federal Reserve Transparency Act -- that would require a Government Accountability Office (GAO) audit of the Fed.
The Federal Reserve Transparency Act amends current law to require the GAO to audit certain aspects of the Federal Reserve’s records currently exempted from transparency, including communications between the central bank and the Department of the Treasury, transactions made with foreign governments and central banks, and transactions made under the direction of the Federal Open Market Committee, which is responsible for decisions related to interest rates and the money supply. Contrary to the arguments of the opponents of the bill, the Federal Reserve Transparency Act does not allow Congress to dictate monetary policy.
Why, then, should all members in both chambers of Congress put their weight behind this bill?
- Simply put, Congress created the Fed, so Congress should have oversight over it. Especially following the 2007-2008 financial crisis, which many believe was at least contributed to in large part by the central bank’s loose monetary policy and worsened in its aftermath by subsequent unprecedentedly aggressive intervention by the Fed, the people deserve answers for how decisions are made at the Fed. This is especially surrounding interest rates, which pertains to the rate at which banks lend money to each other and, in turn, affects the cost of borrowing for all Americans.
- There is much work left to be done in getting these answers. Congress opened up some of the Fed to examination -- only after making the terrible decision to bail out “too big to fail” banks, though -- including its loans to private companies, “internal controls, policies on collateral, use of contractors and other activities.” It did not, however, allow the GAO to examine monetary policy decisions, which are those affecting interest rates. This shortcoming is the one at the center of the Federal Reserve Transparency Act.
- It is supported by such liberty champions as Reps. Thomas Massie (R-Ky.) who is the lead sponsor, Paul Gosar (R-Ariz.), Jim Jordan (R-Ohio), Mark Meadows (R-N.C.), Tim Burchett (R-Tenn.), and Chip Roy (R-Texas), but also has support from more moderate members like Reps. Chris Stewart (R-Utah), Bob Latta (R-Ohio), Will Hurd (R-Texas), and Virginia Foxx (R-N.C.). In the Senate, it is led by Sen. Rand Paul (R-Ky.) and cosponsored by, again, liberty champions such as Sens. Mike Lee (R-Utah) and Steve Daines (R-Mont.) as well as more moderate Sens. Roy Blunt (Mo.) and Todd Young (R-Ind.).
- It’s bipartisan (the good kind), with nearly 100 cosponsors in the House. Currently, it sits at 98 cosponsors -- 39 original and 60 added since its introduction in January of 2019. This is an impressive list, but is not quite matched in the Senate, with only 8 cosponsors, all of whom are Republican and only one of whom has joined since its introduction.
- We have a president who would likely sign the legislation, unlike his predecessor. President Trump tweets regularly about the Federal Reserve messing things up, as he sees it. So, whether we disagree with his reasons for attacking the Fed or not, he appears open to having more insight into and accountability for Fed decisions, especially in an economy that he has helped to make so strong.
Undoubtedly, Congress should pick up where it left off, at the very least. It is unfortunate that, when there was a Republican-controlled House and Senate in the 115th Congress and a Republican president during that time, this bill did not get through both chambers and over to President Trump’s desk to become law. However, it will always be a noble cause to do everything in our power to push for this to happen at the soonest possible moment. A few calls to your representative and senators to support, cosponsor, and push for a vote on H.R. 24 and S. 148, respectively, may be what is needed to push this bill across the finish line in due time.