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Public Statements

Federal Reserve Transparency Act of 2012

Floor Speech

By:
Date:
Location: Washington, DC

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Mr. CUMMINGS. Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise today in opposition to H.R. 459, which passed out of the Oversight Committee without even a single hearing and without testimony from any Federal Reserve officials.

Let me be clear: the Government Accountability Office has had the authority to audit the Federal Reserve's books for three decades. In 2010, the Dodd-Frank Act expanded the types of audits GAO conducts of the Federal Reserve, as well as the data the Fed must disclose to the public. For example, Dodd-Frank required the GAO to audit the emergency financial assistance provided during the financial crisis.

The act also opens discount window operations and open market operations to audit so GAO can assess the operational integrity, collateral policies, fairness, and use of third-party contractors. And Dodd-Frank requires the Federal Reserve to release information regarding borrowers and counterparties participating in discount-lending programs and open market operations. Mr. Speaker, as a conferee who helped craft the final Dodd-Frank legislation, I supported all of these provisions.

I believe other areas of the Federal Reserve's operations are also ripe for audit. During the committee's consideration of this legislation, I offered an amendment that would require GAO to perform an audit of the independent foreclosure reviews currently being conducted by the Federal Reserve and the Office of the Comptroller of the Currency.

Fourteen mortgage servicers have been required to establish a process under which borrowers can request an independent review of their loan histories. But at the end of May, only 200,000 out of about 4.4 million eligible borrowers had requested an independent review of their foreclosure cases. We need to understand whether the design of the program has limited the number of borrowers who have sought reviews of their cases.

Further, it is unclear how the types and amounts of remediation are being determined. This is precisely the type of issue that should be reviewed by the GAO. Certainly, the public has a right and the Congress has a responsibility to know and understand the transactions and enforcement actions undertaken by the Nation's central bank. However, when Congress established the Fed in 1913, it understood that independence from political interference was critical to the bank's ability to fulfill its monetary policy responsibilities.

The Dodd-Frank Act was carefully crafted to expand transparency while preserving the protections that ensure the independence of the Federal Reserve's internal deliberations on monetary policy matters. The Board of Governors of the Federal Reserve must be able to pursue the policies it considers most responsive to our Nation's current economic conditions and most likely to fulfill its dual mandate of promoting maximum employment and stable prices.

We should not allow GAO examinations to be the back door through which politics intrude on monetary policy--which is what this legislation would allow. Opening the Federal Reserve's internal policy deliberations to GAO review could influence how such deliberations are conducted and potentially the policies that are chosen, thus degrading the Fed's independence.

Last week, the Chairman of the Federal Reserve, Mr. Bernanke, described the potential impact of this bill to the Financial Services Committee. He said:

The nightmare scenario I have is one in which some future Fed Chairman would decide and say to raise the Federal funds rate to 25 basis points and somebody would say, I don't like that decision. I want the GAO to go in and get all the records, get all the transcripts, get all the preparatory materials and give us an independent opinion whether or not that was the right decision.

I share Chairman Bernanke's concern. For that reason, during the markup of this legislation in the Oversight Committee, I offered an amendment that would have retained the protections for the Board of Governors' internal monetary policy deliberations to ensure that the audit required by this legislation did not intrude on the Federal Reserve's independence. I continue to believe this provision is needed to ensure this bill does not prohibit the ability of the Federal Reserve to implement monetary policies to strengthen our Nation's economy as it has done repeatedly throughout the recent financial crisis.

I reserve the balance of my time.

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