Republicans at this week’s hearing with Federal Reserve Chair Janet Yellen raised questions about how much influence the executive branch holds over the central bank and argued in favor of accountability reforms to both protect the Fed’s independence in its conduct of monetary policy and to help give the economy greater certainty.
In its coverage of the hearing, the Associated Press reported that Republicans on the committee “challenged the central bank’s lack of accountability”
Members “seized on Ms. Yellen’s official calendar records and an October speech on inequality, just before the midterm elections, as evidence she was leaning towards the Obama administration and Democrats,” reported the Wall Street Journal in its coverage of the hearing.
While Chair Yellen and Democrats argued reforms would open the Fed to political influence, “Republicans at the hearing countered that Ms. Yellen’s calendars show the executive branch has far more access, and potentially more influence, than Congress,” the Journal reported.
“Opponents argue any reforms threaten the Fed’s monetary policy independence, but the greatest threat to that independence comes from the executive branch, not the legislative branch,” said Chairman Jeb Hensarling (R-TX). “While the Federal Reserve Chair testifies publicly before this committee twice a year, she meets weekly with the Treasury Secretary in private. And for decades there has been a revolving door between Treasury officials and Fed officials which continues even today…Fed reforms are needed and I for one believe Fed reforms are coming.”
“The Federal Reserve has proven time and time again that its government knows best approach doesn't hold the cure for what ails the economy," said Monetary Policy and Trade Subcommittee Chairman Bill Huizenga (R-MI). "It's time we restore certainty as well as fiscal responsibility, and we must lift the veil of secrecy to ensure that the Fed is accountable to the people's representatives, the same people that created the Federal Reserve in the first place."
Capital Markets and Government-Sponsored Enterprises Subcommittee Chair Scott Garrett (R-NJ) said, "In theory, having a technocrat like the Fed to simply implement monetary changes based on basic facts, it sounds appealing. But in practice, that is not anywhere close to what happens at the Fed."
The Housing and Insurance Subcommittee held a hearing Thursday on the Federal Housing Administration (FHA), the second in a series that began earlier this month with the full committee’s hearing with HUD Secretary Julian Castro.
“House Republicans have argued that the FHA was wrong to make a cut to its annual mortgage insurance premium before its reserve fund reached a statutory minimum – and witnesses agreed,” reported the American Banker in its coverage of the hearing. Witnesses told the subcommittee that the FHA’s premium reduction “is undercutting the private sector and expanding the government’s role in the housing market.”
Subcommittee Chairman Blaine Luetkemeyer (R-MO) said, "The underlying problems at FHA have existed for years and continue to pose a threat to all Americans. If a private business like the ones represented on our panel today operated in a fashion similar to FHA, it would be placed into receivership. Yet FHA continues unapologetically down a dangerous path that we’ve traveled before.""It never ceases to amaze me that Washington doesn't seem to be able to learn the lessons of history and recent history. So here we have Fannie Mae and Freddie Mac jumping back in and offering 30-year loans for borrowers that can only afford a 3% down payment. These loans are exempt from the requirements that another federal agency says are required under the qualified mortgage rule, the Consumer Financial Protection Bureau that are supposed to prevent a recurrence of loose lending," remarked Rep. Andy Barr (R-KY). "This is a double-standard. The American people are tired of Washington living by one set of rules and the private sector and the American people living by another set of rules."
MEMBER SPOTLIGHT
Rep. Ann Wagner | Wagner bill clashes with Obama proposal to regulate financial advisers
Wagner said Obama’s reforms could drive up the cost of financial advice for low- and middle-income holders of retirement accounts, thereby depriving them of that service. Wagner also said Obama was pushing the tougher rule without adequately studying its need and potential impact.
Rep. Randy Neugebauer | Overregulation Harmed America’s Financial Sector
In the midst of the financial crisis, the Democrat-controlled Congress did not do the responsible thing. Instead of comprehensively studying the crisis, Democrats in Washington threw a blanket over the financial sector in the form of the Dodd-Frank Act.
Weekend Must Reads
American Enterprise Institute | The Fed and inequality returns
The Fed chair shouldn’t sound like a left-leaning politician opining about hot-button political issues.
American Banker | An Open Letter to Elizabeth Warren on the Future of Community Banks
Facts should be the foundation for forming opinions. To suggest that community banks are doing just fine after Dodd-Frank is contrary to facts.
Bloomberg | CFPB Proves Its Critics Right
When Dodd-Frank was being debated in Congress, critics warned that the CFPB would have little accountability and would therefore be inclined to overreach. On this issue, the agency seems determined to prove that fear right.
Wall Street Journal | Obama vs. Savers
Ignoring existing regulation, Mr. Obama is making his usual argument that consumers are helpless against the predations of businesspeople. The solution naturally involves lawyers making lots of money. And in order to avoid industrywide chaos, the Washington bureaucracy will issue a flood of exemptions. At least Mr. Obama hasn’t promised that if you like your broker you can keep your broker.
On the Horizon
March 3, 2015 2:30 p.m.
Full Committee Hearing
"The Semi-Annual Report of the Bureau of Consumer Financial Protection"
March 5, 2015 9:00 a.m. Capital Markets and Government Sponsored Enterprises Subcommittee Hearing
"Oversight of the SEC’s Division of Enforcement"
In the News
CNBC Video | Chairman Hensarling Reacts to Fed Chair’s Testimony
Bloomberg | Rep. Huizenga Calls for More Fed Transparency
CNBC | Are community banks doomed to fail?
Wall Street Journal | Fed’s Yellen Fends Off Charges of Partisan Tilt
American Banker | House GOP Hammers Yellen Over White House Meetings
Fiscal Times | HUD Gives $37 Million in Housing Subsidies to the Wrong People
The Hill | Ex-Im critics pounce after bank yanks data
MainStreet | Dodd-Frank's Unintended Consequences - Wall Street Reaps Benefits of D.C. Regulation
Wall Street Journal | Fannie, Freddie Weak Earnings Raise Possibility of Future Bailouts
The Hill | GOP bill aims to block financial adviser regs
American Banker | FHA Premium Cut Keeping Private Sector Out of the Market, Industry Claims
Washington Examiner | Fed's already political, GOP argues in oversight push
The Hill | Ex-Im worker accused in bilking scheme