Fed leader opposes GOP plan on oversight
WASHINGTON — Federal Reserve Chair Janet Yellen said Tuesday that legislation supported by House Republicans to make the Federal Reserve more transparent and accountable would be a “grave mistake” that could harm the U.S. economy.
Yellen said the proposal, which could be voted on by the House this week, is “significantly flawed” because it would require the Fed to use a mathematical rule in determining where to set interest rates.
She said that approach is unworkable and would lead to “poor economic outcomes.”
The measure is supported by Republicans who want to increase congressional oversight of the Fed but is strongly opposed by Democrats.
“The bill would severely impair the Federal Reserve’s ability to carry out its congressional mandate and would be a grave mistake, detrimental to the economy and the American people,” Yellen wrote in a letter to House Speaker Paul Ryan, RWis., and Minority Leader Nancy Pelosi, D-Calif.
The House majority leader’s office has announced it is on the schedule for a vote by the full House this week.
Late Tuesday, the Obama administration issued a statement saying it strongly opposed the proposal.
If it passes Congress, the president’s advisers would recommend he veto the legislation.
But House Financial Services Committee Chairman Jeb Hensarling, R-Dallas, said the measure known as the Fed Oversight Reform and Modernization (FORM) Act was needed to deal with the enhanced powers the Fed has used to respond to the 2008 financial crisis and the deep recession that followed.