The Detroit News - Reform Bill Would Make Federal Reserve Accountable

Op-Ed

By Rep. Bill Huizenga

Marriner Eccles, chairman of the Federal Reserve under President Franklin Roosevelt, once began his testimony to Congress by saying: "I am speaking for the Board of Governors of the Federal Reserve System, an agency of Congress."

Eccles recognized what many seem to have forgotten over the Federal Reserve's 100-plus years in existence -- the Fed was created by Congress and is accountable to the American people. Since first opening its doors in 1913, the Federal Reserve has increasingly operated in a "man behind the curtain" manner as its authority has continued to expand at a pace far outstripping transparency and accountability standards.

Today, the Federal Reserve has an unprecedented level of influence and control over the financial system, and despite this unbridled concentration of power the Fed has failed to accurately predict and respond to changing economic conditions. Because of these shortcomings, nearly every generation of hardworking Americans, since the Fed's creation, has suffered through a financial crisis. No bureaucracy, especially one with as poor a record as the Fed, should be allowed to go unchecked.

To address these concerns, I introduced The Fed Oversight Reform and Modernization Act of 2015. The FORM Act makes three fundamental changes to improve how the Federal Reserve conducts monetary policy.

■First, by requiring the Fed to regularly communicate how its policy choices compare to a benchmark rule instead of continuing the ad-hoc strategy currently being employed, the FORM Act will help consumers and investors make better decisions in the present and form more sound expectations about the future. Even Chairwoman Janet Yellen once championed the merits of this approach, stating that "the framework of a Taylor-type rule could help the Federal Reserve communicate to the public the rationale behind policy moves." The FORM Act does not dictate any particular monetary policy course or specific rule; it simply requires the Fed to transparently communicate its decisions regarding monetary policy to Congress and the American people.

■Second, the FORM Act reins in the Federal Reserve's emergency lending powers under Section 13(3) of the Federal Reserve Act by closing a glaring loophole and preventing future bailouts. Responsibly limiting the Federal Reserve's lending authority has support from across the ideological spectrum ranging from conservatives such as Speaker of the House Paul Ryan, to liberals such as Sen. Elizabeth Warren. This provision improves accountability at the Fed by raising the threshold for emergency lending, and places serious and needed restrictions on the bailout culture.

■Lastly, the FORM Act gives the American people a greater accounting of the Fed's actions by requiring a more thorough audit of the Federal Reserve. This provision has enjoyed strong, bipartisan support in the past and is critical in proving how misguided and sometimes harmful the Fed's monetary policy decisions have been.

By passing the FORM Act last month, the House took a strong step toward restoring accountability and transparency at the Federal Reserve. With as much power and influence as the Fed has over the everyday decisions Michiganians make, transparency and accountability are not luxuries, they are necessities. With the FORM Act, we can have a more open and accountable government while laying the groundwork for a stronger economy that benefits families in Michigan and across the nation.

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