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Public Statements

Federal Reserve Transparency Act of 2012

Floor Speech

By:
Date:
Location: Washington, DC

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Mr. FRANK of Massachusetts. Mr. Speaker, I think this is a bad idea, and I am somewhat confused.

By the way, we will be debating tomorrow a bill which restricts rulemaking, and it exempts the Federal Reserve, as I read it. So we're kind of on again/off again about the Federal Reserve. It seems to me what we're talking about is taking some fake punches at the Federal Reserve but not doing anything serious.

My Republican colleagues brought up a reconciliation bill that was going to subject the Consumer Bureau to appropriations.

So I offered an amendment to subject the Federal Reserve to appropriations. That was voted down. So we're not going to restrict their rulemaking. We're not going to subject them to appropriations, even though that's being done elsewhere. We're going to audit them, which is a way to look tough without really being tough.

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Mr. FRANK of Massachusetts. No. I reclaim my time and say we should do none of them. I was saying I have a consistent position. I don't think we should do any of them. What I'm saying is, people who get up there and beat their chest about how tough they are and they're not afraid of the Federal Reserve but exempt it from the great rulemaking bill, and subject the Consumer Bureau--that terrible threat to the well-being of Americans--to the appropriations process, but let the Federal Reserve, which spends about 150 times as much, go free--I am inclined to doubt their seriousness. Not their purity, that would be a violation of the rules, but their seriousness. This is a way to shake your fist at that big, bad Fed. And it's not a good way.

We hear a lot about uncertainty. Remember, the Federal Reserve is now subject to a complete openness about all of its transactions with private companies. We did that last year. The gentleman from Texas had a major role in that. When the Federal Reserve deals with any other institution, we know what it does. We don't know it necessarily the same day. There were these predictions about what terrible things were going to happen when the Federal Reserve did this and that. They haven't come true. Maybe they will some day, but we will know it.

This makes this exception: it says that we will audit the decisions about monetary policy. It says that members who vote on what the interest rate should be will now be audited. They will be subject to being quizzed about why they did that. Now, I will tell my Democratic friends, understand that one part of this problem is the objection on the part of the Republican Party to the fact that our Federal Reserve, unusual among central banks, has a dual mandate. They are charged under our statute to be concerned about inflation and about unemployment.

Now, the Republicans have an agenda they're keeping on low key until next year. They have a bill, but they won't act on it yet. But they would like to strip that part of the mandate. They would like the Federal Reserve to be only involved in inflation. They don't like the notion that the Federal Reserve deals with unemployment, and this is a way that, if it were ever to become law, and no one thinks it will--this is a, Look how tough we are. We are going to wave our fists at the Fed. But it would be a way to kind of put pressure on members of the Open Market Committee and see, were you worried about unemployment when you did this? That's the audit. This has nothing to do with how they spend their money. It has nothing to do with whom they contract. That is what people usually think about an audit. It doesn't have anything to do with whether they are efficient or not. It is an ideological agenda by a group of people who didn't like what the Federal Reserve was doing--under, by the way, George Bush, there was reference to the bailouts, which were, of course, under the Bush administration. One of the things that we did, by the way, in our bill 2 years ago--and all my Republican colleagues voted against the bill--was to take away from the Federal Reserve the power they used--under President Bush--to give/lend $85 billion to AIG. We rescinded that. I don't think Mr. Bernanke, a Bush appointee, was doing the wrong thing necessarily, but we took back that power.

So this is partly a show because on the two serious efforts to curtail the Fed's powers, my Republican colleagues aren't there. But secondly--and as I said, I'm consistent--I don't think that we should do any of these things. I think what we did with regard to openness makes sense. I'm not pretending to be tough when I'm not.

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Mr. FRANK of Massachusetts. But what it will do is destabilize. We have worries about expectations. There is a fear that we will be too inflationary or that we won't grow enough. People on Wall Street are not as sophisticated as some people think. I don't mean they're not sophisticated about their own business, as we know, but they will read this and take it more seriously than the Members here do who think it might eventually become law, and it will destabilize some of the financial system. They will see it as political interference not with the contracting procedures, not with the budget, not with how many cars they have, but with how they decide on interest rates. And the perception that the Congress is going to politicize the way in which interest rates are set will in itself have a destabilizing effect.

And as I said, nobody here thinks this will ever become law. But there is this fear on the part of others who don't know that that will translate into precisely the kind of uncertainty, precisely the kind of unsettling on investments that my Republican colleagues pretend to fear, and it will also send them the message, stop worrying about unemployment.

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Mr. FRANK of Massachusetts. Mr. Speaker, to illustrate the misconceptions about this bill, let's refer to what the gentleman from Utah (Mr. Chaffetz) had to say. He said 76 percent of the purchasers of this and that. Well, if they were so nontransparent, I don't know how he would know that. He didn't have a subpoena. But the fact is, yes, he knows that because of the transparency we've already built in. But all the more important, the details, the specifics of every one of those transactions are already public.

This isn't about those transactions or about with whom they were done and under what time period. It's about the motives of the people setting monetary policy.

And let me address the Constitution. Yes, it is true that the Constitution gives us the power to do this. The Constitution gives us a lot of power. It gives us power to declare war on Canada. It gives us the power to do a lot of things. Wise people pick and choose which powers they use.

But this is not about getting more information about their transactions. All of that is out there. This is an effort to give politicians, a wonderful group of people of which I am one, more direct involvement in the actual decisions on setting of interest rates than is good for the economy.

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Mr. FRANK of Massachusetts. Mr. Speaker, I'm glad that the Committee on Government and Oversight isn't the official House historian. In fact, there was a motion to include language like this offered to the financial reform bill. I voted ``no,'' as did Mr. Watt. It was included in the bill. It's true, I voted for the bill. Of course, the gentleman from Texas voted against the bill. So if your vote on the whole bill is taken as an account of what you feel, he was against it.

But when it went to conference, it was not in the Senate bill--which was the text of the conference--so it did not come up, and no Republican conferee offered it as an amendment. That is, in the conference, that language which I and the gentleman from North Carolina voted against was not offered by any Member of the conference, Democrat or Republican.

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