Fed Oversight Reform and Modernization Act of 2015

Floor Speech

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Mr. HUIZENGA of Michigan. Mr. Chairman, I rise today in support of H.R. 3189, a wonderful bill called the Fed Oversight Reform and Modernization Act, the FORM Act.

Mr. Chairman, Marriner Eccles, Chairman of the Federal Reserve under President Franklin Roosevelt, once began testimony to Congress by stating: ``I am speaking for the Board of Governors of the Federal Reserve System, an agency of Congress.''

Chairman Eccles recognized what many seem to have forgotten over the Federal Reserve's 100-plus-year history, that the Fed was created by Congress; the Board of Governors are all appointed for terms of 14 years by the President and confirmed by Congress; and it operates per its charter and laws set out by, yes, Congress. Therefore, the Federal Reserve is actually or, theoretically, is supposed to be accountable to Congress.

Today, the Federal Reserve is one of the most powerful institutions in the world. It is past time to restore transparency at the Fed and hold it accountable to the American taxpayers.

The U.S. Federal Reserve System, or the Fed, as it is known, was created in 1913 in response to a series of economic crises early in the 20th century. Although the Fed was created as an independent agency deriving its power from Congress, over the past 100 years, the Fed's power has significantly expanded.

While originally created to provide stability to the banking business, the Federal Reserve has gained unprecedented power, influence, and control over the financial system while remaining shrouded in mystery to the American people. At the same time, the American people have continued to suffer through a financial crisis, at least once per generation. With such a poor record, the Fed should not be free to carry on without accountability to the institution that created it.

Mr. Chairman, we will not fully realize robust economic growth until the Fed changes the conduct of its monetary policy. Six years have passed since the recession officially ended, but the U.S. economic opportunity remains well short of its potential.

The Fed must be accountable to the people's Representatives as well as to the hardworking taxpayers themselves. We need to modernize the Federal Reserve, restore accountability, and bring it into the 21st century. That is why I introduced H.R. 3189, the FORM Act of 2015. The FORM Act makes two fundamental changes to improve how the Federal Reserve conducts monetary policy.

Now, I know my colleagues on the other side of the aisle tend to kind of like to pass bills before they know what is in those bills. That is one of the ways that they discover what is in those bills. But if they actually read this bill, they would see that it protects the Fed's ability to develop what it believes is the best course of action on monetary policy--the exact opposite of what my colleague was saying. It requires them to then give the American people a greater accounting of its actions.

My bill directs the Federal Reserve to transparently communicate its monetary policy decisions to the American taxpayers--not what it must do, as is being asserted. Rather, they must simply explain what they are doing and why they are doing it. By requiring the Fed to regularly communicate how its policy choices compare to a benchmark guideline instead of continuing the ad hoc strategy currently being employed, the FORM Act will help consumers and investors make better decisions in both the present and create more sound expectations about the future.

Even Chair Yellen once championed the merits of this approach, stating that ``the framework of a Taylor-type rule could help the Federal Reserve communicate to the public the rationale behind policy moves.'' The FORM Act does not dictate any particular monetary policy course; it simply ensures that the Fed transparently communicates its monetary policy decisions. I can't agree more with Chair Yellen.

Second, the FORM Act reforms the Federal Reserve's emergency lending powers under section 13(3) of the Federal Reserve Act, closing a glaring loophole and preventing the likelihood of future bailouts, as we have seen in the past. During the last financial crisis, the Fed used extraordinarily broad powers to provide trillions of dollars in low-cost loans to a handful of massive financial institutions.

The FORM Act raises the bar from the current trigger, permitting the Fed to invoke its emergency lending powers only upon finding that--and this is from the text of the bill--``unusual and exigent circumstances exist that pose a threat to the financial stability of the United States.''

Responsibly limiting the Federal Reserve's lending authority has support from across the ideological spectrum, ranging from conservatives to liberals, such as Senator Elizabeth Warren.

The FORM Act also does the following: It requires the Fed to conduct cost-benefit analysis for all regulations it promulgates. Failure to conduct cost-benefit analysis results in excessive regulatory burdens on small banks and businesses, which harm the economy and I believe have slowed our recovery.

It also requires transparency about the Federal Reserve's bank stress tests as well as the international financial regulatory negotiations conducted by the Federal Reserve, the Treasury Department, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, and the Federal Deposit Insurance Corporation.

Mr. Chairman, I am afraid that we are sliding into a much broader area of regulation that is not U.S. regulation but is actually European and world regulation. It requires the Federal Reserve to review the salaries of highly paid employees. It provides for at least two staff positions to advise each member of the Board of Governors independent from the Chair, and it requires Fed employees to abide by the same ethical requirements as other Federal financial regulators.

That sounds like an excellent idea in my mind.

It clarifies the blackout period governing when Federal Reserve governors and employees may publicly speak to Congress as well as to the public on certain matters, and it ends automatic seats at the Federal Open Market Committee table, which provides a more balanced representation of votes on Federal policy at the FOMC.

It requires the full FOMC to decide policy rates on excess balances maintained at a Federal Reserve Bank by a depository institution. It removes restrictions placed on the Government Accountability Office's ability to audit the Fed, and it directs the GAO to conduct an audit of the Fed within 12 months of enactment and report back to Congress.

Finally, the FORM Act establishes a bipartisan

monetary commission, as proposed by Chairman Brady, to identify other opportunities for improvement.

Mr. Chairman, we can no longer afford to have an entity with so much power as the Federal Reserve by operating on a whim with ad hoc policy. The reforms in this legislation strike the right balance between holding the Fed accountable to Congress and the American people while still affording it its independence to make monetary policy decisions free from political pressure of all stripes.

Mr. Chairman, the Federal Reserve System is an agency of Congress. As such, it is not infallible, and its independence should not be unlimited. Let's restore proper congressional supervision and provide the American people with transparency. I urge my colleagues to vote in support of H.R. 3189, the Fed Oversight Reform and Modernization Act of 2015.

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