* Ryan has frequently sparred with Fed chairman
* Running mate criticized quantitative easing
* Backs congressional audits of Fed monetary policy
By Mark Felsenthal
WASHINGTON, Aug 12 Paul Ryan, Mitt Romney's
newly minted running mate who is known in Washington as a budget
hawk, brings an extra appeal to conservatives as a vocal critic
of the Federal Reserve's aggressive efforts to stimulate growth.
In picking Ryan -- a Wisconsin congressman whose provocative
plan to reduce government spending has made him a favorite of
the conservative Tea Party movement -- Romney shifted the
conversation about the presidential race to one that starkly
contrasts Republican and Democratic views on government spending
Part of that dialogue is the role of the Fed, which in the
past few years has undertaken a massive effort to ease monetary
policy and stimulate spending in a way that conservatives have
decried as disastrous for America's future.
As the Republican chairman of the House Budget Committee and
through his membership on other House panels, Ryan has
frequently verbally sparred with Fed Chairman Ben Bernanke,
especially over the Fed's bond buying.
After lowering interest rates to near zero in 2008 to pull
the economy out of a deep recession, the Fed has bought $2.3
trillion in bonds and mortgage-related debt to support the
But many worry the bond buying, known as quantitative
easing, is setting the stage for inflation.
Ryan took Bernanke to task at a hearing in February 2011
over the Fed's bond purchases, which the central bank used to
pull down longer term interest rates.
"My concern is that the costs of the Fed's current monetary
policy -- the money creation and massive balance sheet expansion
-- will come to outweigh the perceived short-term benefits,"
While one result of the Fed's ultra-easy monetary policy has
been a weaker dollar that has boosted U.S. exports, Ryan has
said there is "nothing more insidious that a country can do to
its citizens than debase its currency."
Ryan has also supported moves to clip the Fed's wings.
He has backed congressional oversight of the Fed's monetary
policy decision-making over Fed objections, and he supports
eliminating the full employment part of the central bank's dual
mandate, although many at the Fed believe the dual mandate has
served the central bank well.
Ryan's arguments are likely to endear him not only to
conservatives who believe Fed policies are another example of
big government overreach but also to supporters of
Representative Ron Paul, who believes the Fed should be
eliminated and that the United States should return to a
currency pegged to the value of gold or silver.
But while criticism of the Fed may appeal to some factions
of the party, Ryan may need to temper some of his rhetoric to
avoid rattling financial markets.
"We'll probably hear some of Fed-bashing at the convention,
but I think Romney has been advised by his Wall Street friends
to cool it," said Greg Valliere, a political analyst for Potomac
Bernanke has argued in response to criticism from Ryan and
others that the unusually deep recession and the painfully slow
recovery required a bold and sustained response from monetary
"Our policies are hardly unusual," he told Ryan's panel in
February of this year. "At this point almost every industrial
central bank, excluding Canada which had less of a recession
than we did, has a large balance sheet and low interest rates,
including the ones with single mandates."
Ryan has backed legislation put forward by Paul to begin
congressional audits of Fed monetary policy decisions. Paul has
argued that the Fed owes the public greater accountability;
Bernanke said such scrutiny would be "a nightmare" for the Fed
because it would open the door to political pressure and hurt
the ability of the central bank to make unpopular decisions when
The legislation passed the House of Representative with
bipartisan support, but the Senate is unlikely to take it up.
The presumptive vice presidential candidate also supports
narrowing the Fed's mandate to an exclusive focus on price
stability. The dual mandate now requires the Fed to ensure full
employment consistent with low and stable inflation.
Bernanke has said the dual mandate works well and that the
Fed would probably pursue the same course of action it is
following now even if its job were to focus solely on keeping
inflation at bay.