Representative Richard Shelby (R-Alabama), Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, expressed the need for more oversight and accountability from the Federal Reserve during a full committee hearing earlier this week.
The topic of Fed oversight and accountability has become a contentious one in recent months. Senator Rand Paul (R-Kentucky) introduced a bill in January known as "Audit the Fed," which calls for full transparency from the central bank.
Earlier this week in the committee hearing on Federal Reserve Accountability and Reform, Shelby explained why he believed the Fed should be made more accountable.
"Many of the Fed’s actions since the financial crisis have emphasized the need for greater accountability," Shelby said. "The Fed has undertaken three rounds of quantitative easing and grown its balance sheet to a staggering $4.5 trillion. Although the Fed has concluded new bond purchases, it has not begun to unwind its balance sheet. It has also kept its target interest rate close to zero percent for more than six years. After these unprecedented actions, how will the Fed measure its impact on the economy?"
Shelby went on to say that it is "not clear" when the Fed will explain this and other measures such as what indicators it will use to determine when it should unwind its balance sheet.
"The Fed should not only be able to answer these questions, it should be held accountable for its actions," Shelby said.
Democrats have repeatedly resisted any legislation that calls for further scrutiny of the Fed's activity. In December, Fed Chair Janet Yellen said she would "forcefully" oppose any type of Audit the Fed bill, telling reporters that "I do think central bank independence is very important. . . to make sure we can make the decisions we think are best."
While Democrats have stressed the Fed's need for independence, Shelby said he doesn't believe independence makes the central bank exempt from Congressional oversight.
"After all, Congress wrote the statute that created the Fed and sets forth its policy objectives," Shelby said. "The United States Congress created the Federal Reserve System to perform a specific set of functions. While the Fed is an important institution, it is not beyond the reach of Congressional oversight. Therefore, it is entirely appropriate that Congress periodically review the Fed’s structure and authorities."