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WASHINGTON- Financial Services Committee Chairman Jeb Hensarling (R-TX) appeared on CNBC’s Squawk Box this morning ahead of today’s full committee hearing with Treasury Secretary Lew to receive the annual report of the Financial Stability Oversight Council (FSOC).
On the systemic risk created by the Federal Reserve’s loose monetary policy:
“…what we would hope is that FSOC would recognize that the Federal Reserve probably needs to start looking at a more predicable rules-based policy and that we can’t sustain the interest rate policy we have now.”
“So we have this FSOC that at least will identify some of the instability within the financial markets; they just won’t go to the source. And a lot of the source is federal policy.”
“When the FSOC is given the direction to identify emerging threats to financial stability and to make recommendations, unless they will source it, you can’t do anything about it.”
On encouraging the Federal Reserve to follow a rules-based monetary policy:
“In the last Congress, the Financial Services Committee passed legislation that would simply make Federal Reserve less opaque. My reading of economic history and that of many economists is that when we have a more predictable rules-based policy that the market understands, the market knows, and its associated with periods of greater economic growth.”
“I don’t want to politicize the Fed. But given that they have 14-year terms and an independent budget, I’m not sure just how threatened the Fed should feel from the United States Congress.”
“The Fed does not have a monopoly on smart Ph.D. economists. If they have a good methodology it ought to be tested in the court of public opinion and today it’s not.”
On the rule of rulers overtaking the rule of law:
“I do believe that we are dangerously close to really eroding one of our foundational principles and that is the rule of law. We should not have governance by a Chief Executive who has a pen and a telephone but doesn’t seem to have a copy of the Constitution.”
“But even in an emergency situation, we have to be governed by the rule of law. Again, it is a foundational principle, one of the sources of our freedom and our economic prosperity.”
“We’re losing the rule of law to the discretion of regulators and its one of the reasons, I believe, that we are mired in one, one and a half percent economic growth when we are capable of three, four, maybe four and a half percent economic growth. The rule of law must count for something in America.”
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