Bernanke slams Ron Paul's Fed audit bill

WASHINGTON Wed Jul 18, 2012 1:00pm EDT

1 of 3. U.S. Federal Reserve Chairman Ben Bernanke testifies before the House Committee on the Financial Services semi-annual monetary policy report on Capitol Hill in Washington, July 18, 2012.

Credit: Reuters/Jason Reed

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WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke on Wednesday rebutted Republican lawmakers pushing a bill that would give Congress the ability to review monetary policy decisions, saying it could compromise central bank independence.

Bernanke said it would be a "nightmare scenario" if politicians decided to second-guess monetary policy.

"That is very concerning because there's a lot of evidence that an independent central bank that makes decisions based strictly on economic considerations and not based on political pressure will deliver lower inflation and better economic results in the longer term," Bernanke told the U.S. House of Representatives' Financial Services Committee.

The hearing was the likely last chance for retiring Texas Representative Ron Paul, known for proposing the Fed should be abolished, to grill the central bank chairman.

"Trillions and trillions of dollars (are) being printed out of thin air," said Paul.

The Republican-controlled House is on track to take up Paul's Fed audit legislation next week. The bill, which has been co-sponsored by more than half of all House members, looks set to clear that chamber, but not the Senate.

In response to a deep financial crisis and the worst recession in generations, the Fed brought official borrowing costs to effectively zero and bought some $2.3 trillion in Treasury and mortgage bonds in an effort to spur economic growth.

The results have thus far been mixed, with economic growth braking sharply this year after a strong finish to 2011 and the unemployment rate stuck at a still-high 8.2 percent.

The Fed has opened many of its operations, including details of emergency lending, to public scrutiny, although in some instances it did so only as a result of legislation or court order.

Paul's bill would direct the Government Accountability Office, an independent, nonpartisan congressional agency, to conduct a Fed review, and it would remove an exemption monetary policy has enjoyed.

Bernanke said the very notion of a monetary policy audit was misleading.

"The term 'audit the Fed' is deceptive. The public thinks that auditing means checking the books, looking at the financial statements, making sure that you're not doing special deals, and that kind of thing. All of those things are (already) completely open," he said.

(Editing by Phil Berlowitz)

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Comments (59)
YUPtrev wrote:
“independent” my a$$

Jul 18, 2012 12:46pm EDT  --  Report as abuse
azjustin wrote:
If the Fed was to be audited, there would be no way to hide the immensity of corruption in our gov’t. A new prison would have to be built to house the thousands and thousands of politicians that would be sent behind bars for blatant disregard and misuse of American taxpayers money.

If that wasn’t the case, then US monetary policy would be much more transparent, instead of hiding behind the legal system whenever someone wants a peek inside.

Jul 18, 2012 12:49pm EDT  --  Report as abuse
smarch wrote:
the whole system is a “special deal” you terrible person you.

Jul 18, 2012 12:54pm EDT  --  Report as abuse
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