Restoring American Financial Stability Act of 2010

Floor Speech

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Mr. SHELBY. I rise today to support the Sanders amendment to bring transparency to the Federal Reserve. I believe this amendment is needed because the Federal Reserve has abused its independence. The Federal Reserve has repeatedly assumed and exercised vast fiscal powers under the guise of ``monetary policy.'' It has sought to escape accountability for these actions by claiming that its independence places it beyond the scope of congressional oversight. To allow any agency, including the Federal Reserve, to exercise the immense powers now wielded by the Fed with so little accountability is simply incompatible with our constitutional system of government.

Congress granted the Federal Reserve independence with respect to monetary policy on grounds that ``monetary policy'' was a technical, nonpolitical task that did not put taxpayers at risk. Unfortunately, the Fed has failed to stay within the limits envisioned by Congress. Over the past 3 years, the Federal Reserve's balance sheet has exploded to more than $2.3 trillion, with much of the increase related to actions that had little to do with monetary policy and more to do with bailouts, fiscal policy, and plain politics.

Although the Fed likes to pretend it is independent and removed from politics, the reality here is that the Board of Governors of the Federal Reserve is one of the biggest political players in town.

Ironically, while the Fed is fighting this amendment, the Fed remains silent about other measures that would compromise its independence. Why? The answer is politics. When it serves its politics, the Fed is happy to selectively sacrifice its independence. For example, the Dodd bill compromises the Fed's independence by having the Fed directly fund the Democrats' new consumer bureaucracy. This establishes a dangerous precedent. Anytime Congress needs a funding source, it can now go outside the budget process and have the Fed print money. Yet the Fed has remained remarkably quiet. Why? Again, politics. The Fed's silence should come as no surprise given the close political ties between the Board of Governors of the Federal Reserve and the Obama administration. The Board of Governors has clearly decided to help the Obama administration advance its legislative goals.

The Fed cannot have its cake and eat it too. If the Fed wants to be independent, it should defend its independence consistently but otherwise should stay out of politics. On the other hand, if the Federal Reserve wants to be political, it should not expect Congress to treat it as a so-called independent, nor should the Fed expect that its nonmonetary policy actions are exempt from congressional oversight. These activities, even when conducted by FOMC, are fiscal or regulatory actions that involve taxpayer dollars and policy judgments. They are no different from other policy decisions made by the executive branch.

Accordingly, I believe Congress has a constitutional duty to oversee these activities. Unfortunately, the Fed often acts as if Congress should be kept in the dark. It uses this independence as a shield to hide its actions from congressional oversight, including its bailouts of AIG and Bear Sterns. No agency should have the fiscal and regulatory powers exercised by the Fed and not think it has to be fully accountable to Congress. It should.

It is my hope this amendment will be the first step in moving the Fed back to its more limited and traditional role in our regulatory and constitutional systems.

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