May 6, 2010 / 6:42 PM / 9 years ago

Volcker warns audits would harm Fed independence

NEW YORK, May 6 (Reuters) - Paul Volcker, an adviser to President Barack Obama, warned in a letter to key Senators this week that audits of Federal Reserve policy would threaten its independence.

Momentum is growing in the U.S. Senate to tighten up oversight of the Federal Reserve and subject the central bank to broader congressional audits of its operations.

At least 20 Democratic and Republican lawmakers are supporting a proposal from Senator Bernie Sanders that would expand congressional investigators’ powers to audit the Fed.

“A threat to expose the details of active debate within the Federal Reserve about monetary policy decisions would tend to constrain that debate, expose policy-making to greater political pressure, affect markets, and risk the release of sensitive information about particular institutions and relationships with foreign authorities,” Volcker wrote.

Volcker, a former Fed chairman, sent the letter to Senator Christopher Dodd and Senator Richard Shelby on May 5. A copy was obtained by Reuters on Thursday.

Volcker wrote that the provisions in Senator Dodd bill would preserve Fed confidentiality to the extent needed to conduct monetary policy independently.

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