By David Harrison
The House Financial Services Committee approved a Federal
Reserve overhaul bill Wednesday that would change the way the
central bank does business.
The bill would require the Fed to adopt a mathematical rule to
determine where to set interest rates. It would require the Fed to
disclose more details about bank stress tests. And it would allow
members of Congress to ask the Government Accountability Office to
review the central bank's monetary policy decisions.
The Republican-supported bill, which passed on a party-line
vote, is one of several Fed-related bills that have been introduced
in this Congress by both Democrats and Republicans. In May, the
Senate Banking Committee approved financial regulation legislation
that included several provisions that would affect the Fed.
The House bill, sponsored by Rep. Bill Huizenga (R., Mich.)
would also require the Fed chair to testify in both chambers on a
quarterly basis, rather than twice a year. It would raise the
threshold under which the central bank could invoke its "lender of
last resort" powers and would limit the number of firms eligible to
receive the Fed's emergency loans to those that are solvent.
Under the legislation, the central bank would have to conduct a
cost-benefit analysis before promulgating new rules. The Fed's vice
chairman for supervision would also have to provide the House
Financial Services Committee and the Senate Banking Committee with
a report on proposed and anticipated rules.
The Fed didn't have a comment on the bill. But Fed Chairwoman
Janet Yellen has rejected tying monetary policymaking to an
explicit rule. She has also said she opposes GAO audits of Fed
monetary policy. Fed officials are concerned that GAO audits could
make the central bank vulnerable to political pressure and
jeopardize its independence.
Last year, the House passed legislation mandating GAO audits of
the Fed but the bill died in the Senate, which was then under
Democratic control. It is unclear how such legislation would fare
today, now that Republicans control both chambers of Congress.
Write to David Harrison at david.harrison@wsj.com