WASHINGTON (Jan. 10, 2018) – The Federal Reserve needs to be accountable to Congress and subject to appropriate check and balances, and would further benefit from rebalancing the centralized and federal elements in its internal structures, R Street Distinguished Senior Fellow Alex J. Pollock argued today in testimony before the House Financial Services Subcommittee on Monetary Policy and Trade.
In a hearing focused on a set of seven draft bills intended to improve the Fed’s transparency and accountability, Pollock praised several of the measures, including one that would subject Fed expenses to congressional appropriations like other expenditures of taxpayer funds.
“The draft limits the expenditures so subject to those for non-monetary policy related costs. In fact, I think it would be fine to subject all Fed expenses to appropriations,” Pollock said.
He further expressed support for proposals to set blackout periods for communications from the Fed, including communications to Congress, as lasting from one week before to one day after Federal Open Market Committee meetings; requiring the Fed’s vice chairman for supervision to report to Congress on the status of pending rulemakings; and requiring financial and conflict-of-interest disclosures from highly paid employees of the Federal Reserve Board.
Pollock also highlighted the importance of proposals to devolve some of the Fed’s power back to the Federal Reserve Banks, including one to expand membership of the Federal Open Market Committee from five to all of the bank presidents and another that would return election of each Federal Reserve Bank president to the entire board of directors of the bank in question. He also endorsed a proposal to make the FOMC responsible for setting interest rates on deposits with Federal Reserve Banks.
“Since this interest rate has now become a key element of monetary policy, placing it with related monetary decisions is quite appropriate,” Pollock testified.