Good. About fucking time. Just too bad the Democrats - who were supposed to be the party of the people, didn't care about the Fed (even Harry Reid is on tape saying he wanted to audit the Fed, until it was his turn to allow the vote). You want to look at narrowing the wealth gap? Start here!
GOP Senate Takeover Would Put Fed Under Microscope
By Dow Jones Business News, November 04, 2014, 07:52:00 AM EDT
By Victoria McGrane
WASHINGTON--A Republican takeover of the U.S. Senate on Election Day would promise increased political turbulence for the Federal Reserve.
Financial executives say a GOP-led Senate would ratchet up congressional scrutiny of the central bank's interest- rate policies as well as its regulatory duties as overseer of the nation's largest financial firms. Republicans haven't controlled the Senate since before the 2008 financial crisis and recession, which put a spotlight on the Fed and its powers.
"If the Republicans take control of the Senate and thus have control of both the House and the Senate--two words for the Federal Reserve: Watch out," said Camden Fine, president of the Independent Community Bankers of America.
Leading the GOP wish list in dealing with the Fed would be legislation to open the central bank to more scrutiny of its interest-rate decisions, using congressional audits of monetary-policy matters that Fed officials strongly oppose. Many Republican lawmakers also want to require the Fed to use a mathematical rule to guide interest-rate decisions or shift its focus more directly to inflation rather than inflation together with unemployment. All of that would come on top of heightened bipartisan scrutiny of the Fed's regulatory moves.
Many Republicans oppose the unconventional efforts the central bank has taken to bolster the U.S. economy over the past several years. The Fed last week announced the end of its long-running bond-buying stimulus program, known as quantitative easing. But that won't quell GOP criticism, since many Republicans want Fed officials to move quickly now to raise interest rates from near zero and shrink the central bank's balance sheet, which has climbed to near $4.5 trillion.
The GOP is widely expected to retain control of the House, where the Fed has already been the focus of legislation it sees as hostile. Under a Republican-led Senate, Alabama Sen. Richard Shelby would likely become the next chairman of the Senate Banking Committee, which oversees the Fed.
Mr. Shelby is no fan of the Fed. He has been sharply critical of its regulatory performance in the run-up to the crisis. As the top Republican on the banking panel after the crisis, he supported stripping the central bank of its bank-supervision authority when Congress was writing the 2010 Dodd-Frank financial-regulatory overhaul law. He voted against Janet Yellen to be Fed chief, citing her support for the Fed's bond-buying programs and his concerns that they could spark runaway inflation and other economic problems.
A Fed spokeswoman declined to comment.
To be sure, analysts say President Barack Obama would veto anything Fed officials worry would hinder their abilities. But a slate of hostile congressional hearings questioning the Fed's every move and movement of legislation would nonetheless force the Fed to play more defense.
"It still alters the dynamic in some very important ways...and frightening ways from the Fed's perspective," said Karen Petrou of Federal Financial Analytics, which advises banks on policy matters.
In a recent client note, Ms Petrou warned that a Republican takeover in the Senate could intensify congressional pushback against the Fed's use of a new tool, known as overnight reverse repurchase agreements, to raise short-term interest rates when the time comes to tighten policy.
A desire to curb the power of the Fed is one of the few topics on which Mr. Shelby sees eye to eye with Rep. Jeb Hensarling (R., Texas), the chairman of the House Financial Services Committee, say industry lobbyists and analysts. That means the two might be able to find common ground on legislation.
Mr. Hensarling's committee, which has jurisdiction over the Fed in the House, held 11 hearings in the past year examining various aspects of the Fed's authority. The effort culminated in legislation proposing a multifaceted overhaul of the Fed that would, among other things, require the Fed to adopt a formal mathematical rule to guide its interest- rate decisions. Ms. Yellen opposes such a move.
While many Democrats oppose meddling with the Fed's monetary-policy powers, efforts to probe the Fed's substantial regulatory powers might find more sympathy on the left. Democrats and Republicans alike regularly question whether the Fed has done enough to rein in the nation's largest financial firms since the 2008 crisis.
Sen. Sherrod Brown (D., Ohio) recently said the Senate Banking Subcommittee on Financial Institutions and Consumer Protection will hold a hearing to investigate allegations that Fed supervisors are too cozy with the banks they oversee following a report by nonprofit news organization ProPublica and the public-radio program "This American Life." Sen. Elizabeth Warren (D., Mass.) was among those who had called for such a hearing.
Another measure that could get more traction with Republicans in charge is Sen. Rand Paul's "Audit the Fed" legislation. The bill by the Kentucky Republican, a tea-party favorite, would open up the Fed's core monetary-policy deliberations to congressional scrutiny.
Sen. Ted Cruz of Texas, a potential GOP presidential contender in 2016, recently identified passing Mr. Paul's bill as one of 10 top priorities should his party take control of both chambers. Six out of 10 Republican members of the Senate Banking committee are among the bill's 31 co-sponsors as is Senate Republican Leader Mitch McConnell, who is widely assumed to become majority leader if Republicans secure the Senate majority. (Mr. McConnell also would need to win his own re-election battle, which appears increasingly likely.)
Mr. Paul's legislation would direct the Government Accountability Office, a nonpartisan arm of Congress, to conduct a "full audit" of the Fed's activities, including its deliberations on interest-rate policy, and report back to Congress.
Currently, the GAO reviews the central bank's financial operations, but not its policy decisions or agreements with foreign governments and central banks. An outside firm audits the Fed's financial operations and its findings are published in the central bank's annual report.
A companion measure passed the House in September, but Senate Majority Leader Harry Reid (D., Nev.) has kept it off the Senate floor. Fed officials, led by Ms. Yellen, oppose Mr. Paul's bill because they believe it could compromise the central bank's political independence.
"I would be very concerned about legislation that would subject the Federal Reserve to short-term political pressures that could interfere with that independence," Ms. Yellen said during her November 2013 confirmation hearing. She also argued that the Fed is "one of the most transparent central banks in the world."
Write to Victoria McGrane at victoria.mcgrane@wsj.com
GOP Senate Takeover Would Put Fed Under Microscope
By Dow Jones Business News, November 04, 2014, 07:52:00 AM EDT
By Victoria McGrane
WASHINGTON--A Republican takeover of the U.S. Senate on Election Day would promise increased political turbulence for the Federal Reserve.
Financial executives say a GOP-led Senate would ratchet up congressional scrutiny of the central bank's interest- rate policies as well as its regulatory duties as overseer of the nation's largest financial firms. Republicans haven't controlled the Senate since before the 2008 financial crisis and recession, which put a spotlight on the Fed and its powers.
"If the Republicans take control of the Senate and thus have control of both the House and the Senate--two words for the Federal Reserve: Watch out," said Camden Fine, president of the Independent Community Bankers of America.
Leading the GOP wish list in dealing with the Fed would be legislation to open the central bank to more scrutiny of its interest-rate decisions, using congressional audits of monetary-policy matters that Fed officials strongly oppose. Many Republican lawmakers also want to require the Fed to use a mathematical rule to guide interest-rate decisions or shift its focus more directly to inflation rather than inflation together with unemployment. All of that would come on top of heightened bipartisan scrutiny of the Fed's regulatory moves.
Many Republicans oppose the unconventional efforts the central bank has taken to bolster the U.S. economy over the past several years. The Fed last week announced the end of its long-running bond-buying stimulus program, known as quantitative easing. But that won't quell GOP criticism, since many Republicans want Fed officials to move quickly now to raise interest rates from near zero and shrink the central bank's balance sheet, which has climbed to near $4.5 trillion.
The GOP is widely expected to retain control of the House, where the Fed has already been the focus of legislation it sees as hostile. Under a Republican-led Senate, Alabama Sen. Richard Shelby would likely become the next chairman of the Senate Banking Committee, which oversees the Fed.
Mr. Shelby is no fan of the Fed. He has been sharply critical of its regulatory performance in the run-up to the crisis. As the top Republican on the banking panel after the crisis, he supported stripping the central bank of its bank-supervision authority when Congress was writing the 2010 Dodd-Frank financial-regulatory overhaul law. He voted against Janet Yellen to be Fed chief, citing her support for the Fed's bond-buying programs and his concerns that they could spark runaway inflation and other economic problems.
A Fed spokeswoman declined to comment.
To be sure, analysts say President Barack Obama would veto anything Fed officials worry would hinder their abilities. But a slate of hostile congressional hearings questioning the Fed's every move and movement of legislation would nonetheless force the Fed to play more defense.
"It still alters the dynamic in some very important ways...and frightening ways from the Fed's perspective," said Karen Petrou of Federal Financial Analytics, which advises banks on policy matters.
In a recent client note, Ms Petrou warned that a Republican takeover in the Senate could intensify congressional pushback against the Fed's use of a new tool, known as overnight reverse repurchase agreements, to raise short-term interest rates when the time comes to tighten policy.
A desire to curb the power of the Fed is one of the few topics on which Mr. Shelby sees eye to eye with Rep. Jeb Hensarling (R., Texas), the chairman of the House Financial Services Committee, say industry lobbyists and analysts. That means the two might be able to find common ground on legislation.
Mr. Hensarling's committee, which has jurisdiction over the Fed in the House, held 11 hearings in the past year examining various aspects of the Fed's authority. The effort culminated in legislation proposing a multifaceted overhaul of the Fed that would, among other things, require the Fed to adopt a formal mathematical rule to guide its interest- rate decisions. Ms. Yellen opposes such a move.
While many Democrats oppose meddling with the Fed's monetary-policy powers, efforts to probe the Fed's substantial regulatory powers might find more sympathy on the left. Democrats and Republicans alike regularly question whether the Fed has done enough to rein in the nation's largest financial firms since the 2008 crisis.
Sen. Sherrod Brown (D., Ohio) recently said the Senate Banking Subcommittee on Financial Institutions and Consumer Protection will hold a hearing to investigate allegations that Fed supervisors are too cozy with the banks they oversee following a report by nonprofit news organization ProPublica and the public-radio program "This American Life." Sen. Elizabeth Warren (D., Mass.) was among those who had called for such a hearing.
Another measure that could get more traction with Republicans in charge is Sen. Rand Paul's "Audit the Fed" legislation. The bill by the Kentucky Republican, a tea-party favorite, would open up the Fed's core monetary-policy deliberations to congressional scrutiny.
Sen. Ted Cruz of Texas, a potential GOP presidential contender in 2016, recently identified passing Mr. Paul's bill as one of 10 top priorities should his party take control of both chambers. Six out of 10 Republican members of the Senate Banking committee are among the bill's 31 co-sponsors as is Senate Republican Leader Mitch McConnell, who is widely assumed to become majority leader if Republicans secure the Senate majority. (Mr. McConnell also would need to win his own re-election battle, which appears increasingly likely.)
Mr. Paul's legislation would direct the Government Accountability Office, a nonpartisan arm of Congress, to conduct a "full audit" of the Fed's activities, including its deliberations on interest-rate policy, and report back to Congress.
Currently, the GAO reviews the central bank's financial operations, but not its policy decisions or agreements with foreign governments and central banks. An outside firm audits the Fed's financial operations and its findings are published in the central bank's annual report.
A companion measure passed the House in September, but Senate Majority Leader Harry Reid (D., Nev.) has kept it off the Senate floor. Fed officials, led by Ms. Yellen, oppose Mr. Paul's bill because they believe it could compromise the central bank's political independence.
"I would be very concerned about legislation that would subject the Federal Reserve to short-term political pressures that could interfere with that independence," Ms. Yellen said during her November 2013 confirmation hearing. She also argued that the Fed is "one of the most transparent central banks in the world."
Write to Victoria McGrane at victoria.mcgrane@wsj.com
