Lawmakers revive legislation in uphill battle to shed light on Federal Reserve’s monetary policy

Nearly 60 Republican lawmakers are renewing a 40-year push to bring the Federal Reserve System under the heel of Congress now that the GOP is in control of the House of Representatives.

Led by Rep. Thomas Massie, Kentucky Republican, the lawmakers argue the Federal Reserve System is not adequately transparent about monetary policy. 

“The Fed is ultimately responsible for determining the monetary policy that directs the world’s largest economy and ought to be accountable to the people’s representatives,” said Rep. Brad Finstad, a Minnesota Republican who supports the bill. 

Despite its name, Audit the Fed, the legislation is not designed to ensure greater accounting of how the Fed spends money. The system already has an independent inspector general charged with rooting out waste. 

Furthermore, the system’s board of governors and its 12 Federal Reserve banks each have their own in-house auditing team responsible for reviewing financial statements. Those statements are then published publicly and subject to an external review by private-sector accounting companies like Deloitte. 

The Fed’s financial activities are also subject to audit by the U.S. Government Accountability Office, the federal government’s supreme auditing agency. Since the Great Recession, the GAO has conducted at least 100 reviews of the Federal Reserve. 

Instead of auditing financial transactions, GOP lawmakers want to make public the internal decision-making process that the Fed’s board of governors undertakes when formulating monetary policy. Currently, the GAO can audit only the Fed’s financial transactions; it can’t review the deliberations, discussions or communications among the board of governors when deciding to raise interest rates or print money. 

“The Fed currently operates under a cloak of secrecy and it has gone on for too long,” said Sen. Rand Paul, a Kentucky Republican whose father introduced the first Audit the Fed bill in 1983. “The American people have a right to know what the Federal Reserve is doing with our nation’s money supply.” 

Mr. Massie’s bill would give the GAO access to all documents, including transcripts and emails, linked to the Fed’s board of governors. The GAO could then furnish those documents to Congress upon request. 

Critics say the push, if successful, would undermine the independence of the central banking system. In the past, both Republican and Democratic presidents have tried unsuccessfully to pressure the Fed into decisions that, while politically beneficial, might not help the economy. 

“The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors,” said Fed Chairman Jerome Powell. 

Proponents of auditing the Fed contend the system is not as independent as it seems. Members of the Fed board of governors and the system’s top employees often find employment within Wall Street or the government after their terms expire. 

Treasury Secretary Janet Yellen served as Fed chairwoman from 2014 to 2018. Before that, Mrs. Yellen did stints as the Fed’s vice chairwoman and president of the San Francisco Federal Reserve Bank. 

Likewise, Mr. Biden’s director of the White House National Economic Council was until last week the vice chairman of the Fed’s board of governors. 

“The Federal Reserve isn’t an independent organization,” said Mr. Massie. “It services and coordinates with private banks and the U.S. Treasury Department every day, but it does not answer to those elected to represent the interests of common people.”