Transparency At The Fed – Why Is Janet Panicked About The House’s FORM Act?…”Congress could, if it wanted, dismantle the Federal Reserve entirely.”

Friday, November 20, 2015
By Paul Martin

Via The New York Sun,

Janet Yellen’s astonishing letter to the Speaker of the House, Paul Ryan, is a sign that the central bank is panicking over the fact that Congress is unhappy with the job the central bank has been doing. Mrs. Yellen’s letter, sent also to the minority leader, Nancy Pelosi, is a protest against a bill known as the Fed Oversight Modernization and Reform Act, which passed a vote in the House and would require the Fed to choose a rules for the formation of monetary policy and let the Congress and the public know what they are.

That has got to be one of the most gentle, democratic, transparent reforms in the history of democracy. It doesn’t require the Fed to stick to its monetary rules, just develop a set of guidelines and let the Congress know what they are. Yet Mrs. Yellen suggests that this mild measure would breach the Fed’s independence from the Congress that created it. Her letter is whiny, inaccurate, and threatening all at once, evincing an “it’s my ball and you can’t play with it” attitude.

One would think the FORM Act would be a lead pipe cinch in a democracy. Mrs. Yellen’s letter is particularly shocking given that it is precisely to the Congress that the Constitution grants the monetary powers. These include the power to borrow money on the credit of the United States, to coin money and regulate the value thereof, to provide for punishment of counterfeiting, to regulate commerce, and to fix the standard of weights and measures.

Congress could, if it wanted, dismantle the Federal Reserve entirely. It could refuse to confirm its governors. It could require that dollars be redeemed in gold. If the Fed doesn’t want to establish a voluntary, non-binding monetary guideline, the Congress could turn around and legislate a binding one. The Congress hasn’t — at least not yet — done any of those things. It is merely considering a bill requiring the Fed to establish its own rules and let the rest of us know what it is doing.

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