FRB Governor Powell Speaks Against Proposals to Limit Fed’s Independence

Board of Governors of the Federal Reserve System (“FRB”) Governor Jerome Powell spoke out against “misguided” proposals to place limits on the Federal Reserve’s (the “Fed’s”) ability to respond to financial crises. He delivered his remarks at the Catholic University of America.

In particular, Governor Powell criticized three types of “misguided” proposals – namely, to:

  • “audit the Fed” (i.e., subject the Fed’s conduct of monetary policy to congressional auditing);
  • require the Fed to adopt and follow specific equations for setting monetary policy, and to face immediate congressional hearings and investigation by the Government Accountability Office whenever it deviates from such policies; and
  • restrict the Fed’s discretion in providing liquidity facilities during financial crises.

Governor Powell argued that such criticisms of the Fed are misleading, since the Fed is “open and transparent” in its operations and “extensive and effective” in its implementation of monetary policy as determined by Congress. Governor Powell also argued that the costs of restricting the Fed’s independence would outweigh any corresponding benefits, given the substantial positive effects of the Fed’s control of monetary policy on the U.S. economy as a whole.

See: Governor Powell’s Speech.