Bernanke: ‘Audit the Fed’ Bill Wouldn't Audit at All

As required by the Dodd-Frank Act, Bernanke pointed out, the GAO “conducted reviews of the Fed’s emergency lending programs during the crisis and of the Fed’s governance structure. Since the financial crisis, the GAO has done some 70 reviews of aspects of Fed operations.”

So what does the bill actually do? Bernanke states that its “principal effect” would be “to make meeting-by-meeting monetary policy decisions subject to congressional review and, potentially, congressional pressure” by repealing existing restrictions, imposed by Congress nearly 40 years ago, on what the GAO can examine when reviewing the Fed.

While the Fed should “continue to strive to improve its transparency and accountability, and in particular to ensure that Congress has all the information it needs to fulfill its oversight responsibilities,”  Bernanke insisted that “this goal is not best achieved by overturning longstanding practice and effectively inserting Congress and the GAO into monetary policy decisions, calling into question the Fed’s independence.”

The risk, he said, is that GAO “reviews and recommendations concerning individual monetary policy decisions would provide a vehicle for members of Congress to apply political pressure on the Fed.”

Speaking from “firsthand experience,” Bernanke wrote that “the [Federal Open Market Committee] sets monetary policy with the best technical information available and without any consideration of politics or partisanship,” adding that he was “also confident that political interventions in monetary policy decisions would not lead to better results.”