Letter to the War Street Journal on Audit the Fed

Dear Editor,

Tuesday’s article, “Central Bankers Bash ‘Audit the Fed’ Bill,” first made me look further for the headlines, “Arsonists Fear Ban On Matches and Gasoline,” or “Burglaries Spike In Anticipation of Crowbar Shortage.”

But as I read on I found, Philadelphia Fed President, Charles Plosser, referring to an audit as “second guessing” and “political pressure.”

Really Mr. Plosser, who is second guessing here? And where is the political pressure? We have Federal Reserve officials appointed by politicians and approved by politicians and interest rates determined by committees and academics.

If we want equitable and stable interest rates, who would really do a better job? Millions of people acting in their own self interest, or a few experts guessing how those people will act?

The Fed has destroyed countless life savings with their zero interest policies. They’ve inspired bubbles based on cheap rates instead of actual value. We call that stable? What is not seen is the prosperity that could exist in a free market for money.

Love, Fritz

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Central Bankers Bash ‘Audit the Fed’ Bill
Powell, Plosser and Fisher Say Monetary Policy Shouldn’t Be Politicized; Rand Paul Sees Proposal as Step Toward Abolishing Fed
Fed governor Jerome Powell says the ‘Audit the Fed’ push is misguided. ENLARGE
Fed governor Jerome Powell says the ‘Audit the Fed’ push is misguided. PHOTO: BLOOMBERG NEWS
By KATE DAVIDSON and MICHAEL S. DERBY
Updated Feb. 9, 2015 1:56 p.m. ET
143 COMMENTS
Three Federal Reserve officials criticized proposed legislation to expand congressional oversight of the central bank’s interest-rate decisions, pushing back against the bill as it is gaining attention.

Fed governor Jerome Powell on Monday called the bill, known to supporters as “Audit the Fed,” misguided. He said it would threaten the central bank’s independence.

The bill “risks inserting the Congress directly into monetary-policy decision making, reversing decades of deliberate effort by the Congress to insulate the Fed from political pressure in carrying out its day-to-day duties,” Mr. Powell said in a speech in Washington.

Philadelphia Fed President Charles Plosser, speaking earlier Monday on Fox Business Network, said of the bill, “To sort of second-guess and put political pressure on the Fed to make decisions…for short-term political reasons I think would be very dangerous.”

Dallas Fed President Richard Fisher , speaking later Monday on Fox Business Network, said that the bill is about “interfering with the making of monetary policy,” and that the central bank is already “audited out the wazoo.”

The financial statements of the Fed board and reserve banks are audited each year by an outside firm. The Government Accountability Office and Fed inspector general also regularly review its activities.

Sen. Rand Paul (R., Ky.) last month introduced legislation with 30 co-sponsors that would expand congressional oversight of the Fed’s monetary-policy decisions. The House passed a similar bill in the last Congress, but it went nowhere in the Senate, which was then controlled by Democrats.

Mr. Paul’s legislation would direct the comptroller general to complete an audit within one year of the bill’s enactment and to issue a report of its findings to Congress. It doesn’t define an audit.

The bill’s proponents’ hopes were boosted when Republicans took control of the Senate this year. But the bill’s prospects in this Congress are uncertain for now, as Senate leadership decides which of many competing priorities to focus on first.

Still, the legislation is gaining attention beyond the Fed. Some financial analysts have taken note recently of its better chances in a GOP-controlled Senate. And Mr. Paul on Friday held a rally in Iowa with supporters of it. “I think there needs to be some sunshine. I’m going to fight ’em, and we’re going to get a vote on Audit the Fed,” Mr. Paul told the crowd.

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Fed Chairwoman Janet Yellen and other Fed officials routinely answer lawmakers’ questions about their views on pending legislation when they testify on Capitol Hill, and they have made no secret of their objections to measures that would reveal too much information about monetary-policy decisions.

Mr. Powell’s remarks were unusual, however, because they were part of an entire speech devoted to a bill moving through Congress. Fed officials say they don’t coordinate their public remarks. He said later, during an interview on Bloomberg Television, that it was “my idea” to give the speech and “I speak only for myself.” A former private-equity executive and the lone Republican on the Fed board of governors, Mr. Powell said experience in the U.S. and other advanced economies has shown that monetary policy is most effective when decisions are made independent of influence by politicians.

“As recent U.S. history has shown, elected officials have often pushed for easier policies that serve short-term political interests, at the expense of higher inflation and damage to the long-term health and stability of the economy,” Mr. Powell said.

At Friday’s rally, Mr. Paul expressed support for eventually eliminating the Fed. Mr. Powell, in answer to a question after the speech, called the bill “a stepping stone to abolishing the Fed.” Mr. Powell also objected to a House bill that would require the Fed to follow a mathematical equation for setting interest rates, and talk on Capitol Hill of imposing further restrictions on the Fed’s emergency lending powers.

Write to Michael S. Derby at michael.derby@wsj.com

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