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Reforming the Federal Reserve


Washington, Nov 7 -

The Subcommittee on Monetary Policy and Trade held a hearing today entitled “Examining Federal Reserve Reform Proposals.” The hearing evaluated three legislative proposals to create a more independent, accountable, and transparent Federal Reserve that would improve economic opportunities for all Americans.

“The three bills considered by the Monetary Policy and Trade Subcommittee today would result in greater transparency, independence, and accountability at the Federal Reserve,” said Subcommittee Chairman Andy Barr (R-KY). “ A more predictable, strategy based monetary policy will give investors and families greater certainty as they make investment and financial decisions.  In addition, these bills would help the Fed focus on monetary policy and get it out of the business of picking winners and losers through the allocation of credit.  That is a solid recipe for what we all want – greater economic opportunity for all Americans.”

Key Takeaways

Topline Quotes from Witnesses

“The efficacy of [the Fed's] sustained artificial low interest rates and massive asset purchases, well after the start of the economic recovery is questionable. It has not stimulated faster growth and has distorted economic and financial performance, and poses sizeable risks.” Dr. Mickey Levy, Managing Director & Chief Economist, Berenberg Capital Markets

“History teaches us that unless governments are constrained constitutionally or by statute, they often resort to the “printing press” to avoid making tough fiscal decisions. But in a democracy, independence must come with limitations on the central bank’s authorities and discretionary powers.” Dr. Charles I. Plosser, Visiting Fellow, Hoover Institution

“The Federal Reserve has a legal mandate to set the course of monetary policy, to supervise and regulate financial institutions, and to serve as a lender of last resort—the “banker to the banks.” In some extraordinary circumstances, carrying out that mandate may result in the Fed’s acquisition of private assets. However, such assets shouldn’t stay indefinitely on the Fed’s balance sheet but should instead be swapped for U.S. Treasury securities, thereby preserving the Fed’s operational independence and designated scope of responsibility.”  Dr. Andrew T. Levin, Professor of Economics, Dartmouth College