WASHINGTON (Reuters) - Democrats on the Senate Banking committee on Wednesday voiced opposition to a bill that would expose the U.S. Federal Reserve to a full government audit.
The support from Democrats shows they are starting to form a united front against Republican-led efforts to open the Fed’s internal discussions of interest rate and other policy matters to the public.
Republicans say the Fed needs greater transparency after it gained too much power during the financial crisis. Fed officials say exposing policy discussions to public scrutiny would increase political pressure on the independent government body.
Republican Senator Rand Paul, a potential 2016 presidential candidate, re-introduced his audit the Fed bill last month. With Republicans now in control of the Senate, and given Paul’s wider profile, central bank officials worry the audit effort has a greater chance of gaining ground this year. The process could begin with the Senate Banking committee, which is expected to take on Fed transparency. There is already widespread support in the House for a Fed audit bill.
Sherrod Brown of Ohio, the top Democrat on the committee, is against the bill, his spokeswoman said. While Brown has supported certain Fed transparency bills before, “he does not see how this legislation will benefit working Americans” Brown Spokeswoman Meghan Dubyak said in an email.
Committee member Jack Reed is also against the bill, the Rhode Island Senator told Reuters on Wednesday. Another key Democrat on the committee, Massachusetts Democrat Elizabeth Warren is opposed to it as well.
“It promotes congressional meddling in the Fed’s monetary policy decisions, which risks politicizing those decisions,” Warren said in an emailed statement, adding that such meddling could have dangerous implications for financial stability.
Key to the progress of the audit bill is the support of Senate Banking Chairman, Richard Shelby. The Alabama Republican has indicated he’s prepared to call a hearing on the issue and has said he is “interested” in the issue of a Fed audit, but he has not stated whether he supports the bill or not.
President Barack Obama would likely veto a Fed audit but there is also a chance it could be added as an amendment to “must-pass” legislation, such as with the bill to fund the Department of Homeland Security.
The Fed is subject to various audits, including reviews of its operations by the Government Accountability Office. Since 1978, its monetary policy discussions have been legally exempt from GAO oversight.
Reporting by Michael Flaherty; Editing by Jonathan Oatis and Andrew Hay