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House Financial Services Committee Sends Fed Reform Bill to a Floor Vote

Congress Wednesday fired its latest rounds in its ever-escalating battle with the Federal Reserve, as a Republican-controlled House committee passed a  reform bill aimed at making the Fed more accountable and transparent. The Fed’s has already warned of serious trouble if the nation’s top financial institution were held to formal policy regarding its ability to set interest rates.

The House Financial Services Committee’s effort to markup and vote on a series of six financial bills included the passage of a bill that requires the Fed to adopt a more predictable rules-based policy that it must share with the public and to conduct a study to determine the appropriate capital requirements for mortgage servicing assets for banks.

Other bills considered include requirements on federal agencies to ensure that new or modified financial regulations are efficient before they are introduced and for the GAO to vet the Fed’s Regulation D, which forces financial institutions to focus on compliance rather than spending time with consumers to meet their financial needs. The committee also approved a five-year reauthorization of the Native American Housing Assistance and Self-Determination Act as part of the package.

In a press statement, FSC chairman Jeb Hensarling (R-Texas) said, “With millions of our fellow Americans unemployed and underemployed, job number one continues to be jobs creation and economic growth. Our committee has approved dozens of bipartisan bills to help alleviate the red tape burden that Washington piles on job creators so all Americans can enjoy a stronger, healthier economy.”

Unsurprisingly, the Fed is wary of rules that dictate how it can set rates and other financial policies. Earlier this month,  Federal Reserve Chair Janet Yellen fielded questions from Republican lawmakers about the policies that would be passed in the House two weeks later. Yellin told the lawmakers that “it would be a grave mistake for the Fed to commit to conduct monetary policy according to a mathematical rule. No central bank does that."

Her reasoning is that any infraction of any rule, no matter how tiny, could trigger a costly and wasteful audit by the GAO. Such a course of action, she said, “would essentially undermine central bank independence in the conduct of monetary policy."

About Author: Scott Morgan

Scott Morgan is a multi-award-winning journalist and editor based out of Texas. During his 11 years as a newspaper journalist, he wrote more than 4,000 published pieces. He's been recognized for his work since 2001, and his creative writing continues to win acclaim from readers and fellow writers alike. He is also a creative writing teacher and the author of several books, from short fiction to written works about writing.
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