In a 241-185 vote, the House passed a bill Thursday largely along party lines that would make major changes to the way the Federal Reserve operates in an attempt to create more transparency.
The Fed Oversight Reform and Modernization Act, spearheaded by Michigan Republican Rep. Bill Huizenga, would lift restrictions placed on the Government Accountability Office, enabling the agency to audit the central bank and narrowing its ability to provide emergency bailouts.
The legislation would also require the Fed to use a formula like the Taylor Rule, a tool used to calculate whether nominal interest rates should be changed, when making rate decisions.
“If the Federal Reserve explained to the public how it made its decisions, the American people would have greater confidence in them,” House Speaker Paul Ryan said in a statement after the vote. “Families could better plan for the future, invest their money wisely, and create opportunity for all of us.”
Critics of the bill claim giving the GAO more access would subject the Fed to more public scrutiny, potentially leading to damaging effects on its ability to avert financial crises.
In a letter written to House leaders Tuesday, Fed Chair Janet Yellen said the legislation would subject the central bank to harmful political influence and argued the annual audits conducted by an independent accounting firm under the Inspector General is already an adequate form of oversight. HaTTiP
