The House GOP on Wednesday fired its latest rounds in its ever-escalating battle with the Federal Reserve, as the Republican-controlled Financial Services Committee passed a reform bill aimed at making the Fed more accountable and transparent.
The Fed has already warned of serious trouble if the nation's central bank were held to formal policy regarding its ability to set interest rates.
The committee's effort to markup and vote on a series of six financial bills included the passage of a bill that requires the Fed to adopt a more predictable rules-based policy that it must share with the public and to conduct a study to determine the appropriate capital requirements for mortgage servicing assets for banks.
Other bills considered include requirements on federal agencies to ensure that new or modified financial regulations are efficient before they are introduced and for the Government Accountability Office (GAO) to vet the Fed's Regulation D, which forces financial institutions to focus on compliance rather than spending time with consumers to meet their financial needs.
The committee also approved a five-year reauthorization of the Native American Housing Assistance and Self-Determination Act as part of the package.
In a press statement, committee chairman Jeb Hensarling (R-Texas) said, "With millions of our fellow Americans unemployed and underemployed, job number one continues to be jobs creation and economic growth. Our committee has approved dozens of bipartisan bills ... to help alleviate the red tape burden that Washington piles on job creators so all Americans can enjoy a stronger, healthier economy."
Unsurprisingly, the Fed is wary of rules that dictate how it can set rates and other financial policies. Earlier this month, Federal Reserve Chair Janet Yellen fielded questions from Republican lawmakers about the policies that would be passed in the House two weeks later. Yellen told the lawmakers that "it would be a grave mistake for the Fed to commit to conduct monetary policy according to a mathematical rule. No central bank does that."
Her reasoning is that any infraction of any rule, no matter how tiny, could trigger a costly and wasteful audit by the GAO. Such a course of action, she said, "would essentially undermine central bank independence in the conduct of monetary policy."
Having been approved, the bill can now go the full House for consideration. Even if passed there, however, it's unlikely to make it through the Democrat-controlled Senate.