The Federal Reserve is lashing out at Sen. Rand Paul’s plan to give Congress more oversight over the central bank, a proposal that could gain traction in the new Republican-led Congress.
The Kentucky Republican reintroduced his “Audit the Fed” legislation last month with 30 co-sponsors, including other potential 2016 GOP hopefuls, Sens. Ted Cruz (Texas) and Marco Rubio (Fla.).
{mosads}The proposal — once championed by his father, former Rep. Ron Paul (R-Texas) —would subject the central bank to an audit by the Government Accountability Office (GAO).
Regional bank presidents from around the country are decrying the plan, which they argue could damage the economy.
“Who in their right mind would ask the Congress of the United States — who can’t cobble together a fiscal policy — to assume control of monetary policy?” Richard Fisher, president of the Federal Reserve Bank of Dallas, said during an interview with The Hill.
Fed Chairwoman Janet Yellen has already vowed to fight the legislation, and President Obama would likely veto it.
Still, Fed watchers note that Paul has become emboldened by the new Republican majority in Congress. And he possesses an ever louder national microphone, as he moves closer to a 2016 presidential run.
Together, those factors could elevate the issue in the coming months, a prospect that has spurred strong words from bank officials.
Philadelphia Fed President Charles Plosser told The Hill that financial auditing “already exists” for the Fed, and warned that Paul’s plan would empower Congress “to audit and question monetary policy decisions in real time.”
“This runs the risk of monetary policy decisions being based on short-term political considerations instead of the longer-term health of the economy,” Plosser said.
Paul pushed back against the criticism, saying Fed officials “will say and do anything to keep their business hidden from the American people.”
For Paul, the legislation allows him to burnish his Republican-libertarian credentials.
And he appears to want to make it part of his early presidential campaigning. On Friday, Paul will hold an Audit the Fed rally in Des Moines, Iowa, as part of a weekend trip to the early presidential caucus state.
The issue could give Paul an opening to tap into the public’s mistrust of the government, more than six years after the federal bailouts that followed the 2008 economic crisis.
“This secretive government-run bureaucracy promotes policies that have impacted the lives of all Americans,” Paul said. “Citizens have the right to know why the Fed’s policies have resulted in a stagnant economy and record numbers of people dropping out of the workforce.”
Fisher said lawmakers are looking to shift blame, having proven “unable to get together with their own colleagues on a working fiscal policy or construct a regulatory regime that incentivizes investment and job creation.”
“So they simply find it convenient to create a boogeyman out of an entity that does its job efficiently — the Federal Reserve,” Fisher said. “To some outsiders the Fed appears to be some kind of combination of Hogwarts, the Death Star, and Ebenezer Scrooge — especially to those who don’t take the time to read the copious amounts of reports and speeches and explanations we emit.”
The twelve presidents of the Fed’s regional banks are well connected, their boards of directors stacked with influential business leaders. They are likely to intensify their opposition to Paul’s proposal.
On Wednesday, Cleveland Fed President Loretta Mester criticized the legislation as “misguided” during public remarks in Columbus, Ohio.
“They really are about allowing political considerations to influence monetary policy decisions,” Mester said in her speech. “This would be a tremendous mistake, because it would ultimately lead to poorer economic performance.”
Yellen, who met with Senate Democrats last week on Capitol Hill, is scheduled to testify before Congress later this month. The appearance will be her first since Republicans seized control of the Senate, and she will likely face questions on the legislation.
Senate Banking Committee Chairman Richard Shelby (R-Ala.), whose panel has jurisdiction on the bill, has also said he is interested in holding hearings on the issue.