Yellen opposes limits to Fed independence
For a number of years, Republican House members have been pushing legislation that would impose limits on the independence of the United States central bank, the Federal Reserve, in various ways. These include requiring it to follow a numerical rule for setting interest rates and subjecting the Fed's interest rate decisions to review by congressional auditors.
These proposals never moved forward with a Democrat in the White House. Now with Republican President Donald Trump, GOP lawmakers are making new efforts to win congressional passage of their proposals.
But Federal Reserve Chair Janet Yellen told members of the House Financial Services Committee on Wednesday that she remained strongly opposed to imposing limits on the Fed's independence. She cited drawbacks that she sees in allowing congressional auditors to review Fed decisions on setting interest rates and on reliance on a simple rule to get rates.
BETTER ECONOMIC ENVIRONMENT
"I think central banks all over the world have recognised that an independent central bank that can focus on the long-term health of the economy ... gives rise to a better economic environment," Yellen told the committee.
In addition to clashes over the Fed's role in helping the economy, Republican and Democratic lawmakers used the hearing with Yellen to argue over the impact of the 2010 Dodd-Frank Act on the nation's financial sector.
President Donald Trump is supporting an effort by congressional Republicans to overhaul the law. They contend that it imposed burdensome regulations that have limited the ability of the banking system to make loans, especially to small businesses.
Democrats argued that bank loans have actually been rising and that repealing the Dodd-Frank law could bring back the dangerous practices that led to the 2008 financial crisis.
GOP lawmakers asked that Yellen put a hold on any banking regulations until Trump is able to nominate an official to be the vice-chairman for bank supervision at the central bank. Trump will have the ability in his first year in office to fill three vacant seats on the seven-member Fed board.