Former Federal Reserve Board Chairman Ben Bernanke says legislation dubbed the Federal Reserve Transparency Act of 2015, which lost a cloture vote Tuesday afternoon in the Senate, has nothing to do with actually auditing the Fed.
The Senate voted 53-44 to advance the bill. It needed 60 votes to make it to the Senate floor.
In his Brookings blog, posted before the vote, Bernanke wrote about S. 2232, otherwise known as the “Audit the Fed” bill. If you think the bill deals with reviewing the Fed’s financial assets and liabilities, records, and operations, “you’d be wrong,” Bernanke writes.
The Fed, he said, “is already thoroughly audited in the usual sense, by an independent inspector general and by an outside accounting firm (currently, Deloitte and Touche), and the resulting financial reports are made public online.”
What’s more, he wrote, “the Government Accountability Office, which does in-depth reviews and analyses (‘audits’ of a different type) of government activities at the request of Congress, has wide latitude to review Fed operations, including supervision and regulation as well as other functions.”
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.”