December 9, 2010 / 10:15 PM / 9 years ago

Fed critic to take reins of House oversight panel

* House GOP picks Fed critic Paul for oversight panel

* Move signals Fed to face scrutiny, likely challenges

By Mark Felsenthal

WASHINGTON, Dec 9 (Reuters) - Republicans in the U.S. House of Representatives on Thursday picked Ron Paul, an inveterate critic of the Federal Reserve, to head a panel that oversees the central bank, paving the way for challenges to the Fed’s authority and secrecy.

Paul, a congressman from Texas who has often been outside the mainstream with his contempt for the Fed, has made clear he does not plan to let a leadership role cool his passion.

“I think they’re way too independent. They just shouldn’t have this power,” the lawmaker told Reuters last month. “Up until recently it has been modest but now it’s totally out of control.”

Paul will the new chairman of the domestic monetary policy subcommittee of the House Financial Services Committee.

Paul’s views have gained wider acceptance after the November midterm elections swept many activist Republican candidates to power. Republicans won control of the House and new clout in setting the agenda in Washington.

The Fed’s recently launched initiative to buy $600 billion in Treasury securities to spur economic growth has raised howls of protest from many Republican lawmakers in an unusual instance of political second-guessing of monetary policy.

Critics say the program risks igniting inflation and debasing the value of the dollar.

To address what some lawmakers view as overreaching by the Fed, senior Republicans have called for stripping the Fed of half of its dual mandate, saying it should focus exclusively on fighting inflation and no longer be tasked with ensuring full employment.

The Fed could find itself facing a renewed effort to allow Congress to review its monetary policy decisions, and Paul’s panel could play a central role.

Paul has written a book called “End the Fed” and believes the dollar should be backed by gold or silver. The United States stopped linking the dollar to gold in 1971.

Paul won surprisingly broad support for legislation requiring congressional audits of monetary policy decisions earlier this year. The Fed strenuously opposed the measure on the grounds it would undermine the central bank’s highly valued independence and succeeded in keeping it out of financial regulatory reform legislation signed into law in July.

Paul’s subcommittee chairmanship and a surge of anti-government energy in the new Congress could revive efforts to audit Fed policy.

Paul also said he hopes to hold hearings looking into global financial organizations like the International Monetary Fund.

It remains to be seen how much Paul plans to use his new-found influence to build consensus behind legislative changes to the Fed’s role.

His maverick streak was on display this week when he was the only member of Congress to vote against calling for the release of jailed Chinese dissident Liu Xiaobo, who is due to receive the Nobel Peace Prize. (Additional reporting by Andy Sullivan; Editing by Kenneth Barry)

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