Press Releases

Today, the House Financial Services Committee is holding a Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity hearing, led by Task Force Chairman Frank Lucas Davidson (OK-03), to review the purpose of the Treasury-Fed Accord of 1951 and how it became the standard approach in conducting modern central banking. 

Read Task Force Chairman Lucas' opening remarks as prepared for delivery:

"Welcome to today’s Task Force hearing revisiting the Treasury-Fed Accord of 1951. 

"75 years ago this month, the Department of the Treasury and the Federal Reserve System reached “full accord with respect to debt-management and monetary policies” – what we know today as the Treasury-Fed Accord. This agreement clearly delineated the roles and responsibilities of the two institutions. That is – the Fed is responsible for monetary policy in accordance with its dual mandate and the Department of the Treasury is responsible for funding the government at the least cost to the taxpayer over time. 

"In the 81^st Congress, just one year prior, the Joint Economic Committee expressed support for the Fed and Treasury to reach an understanding about the division of their authorities. It was appropriate for Congress to be part of the conversation then, just as it is now. 

"It is my intention for this Congress to similarly express the need for a formal dialogue between the Fed and Treasury on the appropriate boundaries of their authority and where increased communication might bolster the strength, resiliency, and depth of the Treasury market, while reinforcing monetary policy independence. I plan to introduce a resolution to do just that.

"This is because quite a few changes have occurred in the last 75 years. Our nation’s deficit to GDP ratio has ballooned from less than 2% to nearly 6%. As we’ve discussed many times in this Task Force, the Treasury market cannot continue to function well if the supply of treasuries outpaces market capacity to absorb it. As Chair Powell has said numerous times, the country is on an “unsustainable fiscal path.” He is not the first Chair to say so, but I hope he is the last. Rising debt servicing costs push all parties involved into tough choices. We can’t let fiscal irresponsibility interfere with the Fed’s ability to do its job. 

"Additionally, the Fed has moved to an ample reserves regime to allow for stronger monetary policy rate control and has engaged in four rounds of quantitative easing, thereby significantly increasing the size of the Fed’s balance sheet. As the Fed adjusts the size of its balance sheet through QE, QT, and reserve management purchases, increased forward communication with the Treasury department could improve coordination between the two entities without jeopardizing monetary policy independence or stoking inflation.

"In 2009, Treasury and the Fed issued a joint statement outlining the Fed’s role in financial and monetary stability while leaving credit allocation to fiscal authorities. While we are in normal economic times, the two entities should discuss their appropriate bounds of responsibility, and the risks encroachment imposes.

"I look forward to hearing from our expert witnesses today and engaging in a robust discussion. 

"I yield back."

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