Federal Reserve Independence

Floor Speech

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Ms. PELOSI. Mr. Speaker, I rise today in strong support of one of the bedrock principles of our economy: the independence of the Federal Reserve Board.

For more than a century, the Federal Reserve has served as a cornerstone of the economic system of our country, tasked with safeguarding price stability, maximizing employment, and preserving the health of our economy, independent from political pressure, insulated from partisanship, and rooted in data and discipline.

When I first came to Congress, Mr. Speaker, I was a member of what was then called the Banking, Housing, and Urban Affairs Committee, now the Financial Services Committee. At that committee, as it is today under the new name, we heard from the Chair of the Fed on the specific amount of time required by Congress on two subjects. According to the Humphrey-Hawkins law, they would report to us on inflation and employment/unemployment, and that was part of the purview in their communication with Congress that was required on a regular basis.

I heard one of the Chairs of the Fed say unemployment is dangerously low. It scared me to death. How could it be? He was reporting as to its impact on inflation. That was when I was a new Member.

When I was Speaker, our Members said frequently: Why don't we have the Fed be more accountable to us?

I said: It has to be independent. They have their own funding. They don't have to depend on us for that because their independence is essential.

Any of us who had economics in college or beyond knows that independence of the Fed is essential to the respect that our country commands in terms of our own economy throughout the world. The Chairman of the Fed is the Chair of the central bank and serves as the Chair of the central banks globally. It can't be a party hack. It can't be somebody who is there because the President wants to create interest rates. That is not what the President's job is, to create interest rates. It is the Federal Reserve Board that does that. It is really important.

I come to you on this day to say this because of the rumors that we hear of the flirtation with making the Fed just a handmaiden of the Presidency. It would be wrong to do. It would be wrong to do, and we would be viewed disrespectfully if we were ever to go down that path.

Now, this comes at a time when we are observing the 15th anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act. As some of us here know who served with Barney Frank, he was the chair of the then Financial Services Committee and a master of his agenda there. Senator Dodd from Connecticut was on the Senate side with that.

It was necessary, Mr. Speaker, because of what was happening in the financial community. I mean, it was awful. It was horrible. We all know that in September of 2008, we were told that our financial system was melting down. It was doing so because of--well, I have written about it in my book, and I won't go through the whole thing right now--what was happening terribly in the financial system by the banks and financial institutions.

What happened? Millions of people lost money, trillions of dollars from the wealth of the country. Millions of people losing their jobs, so many losing their homes, losing their savings, and the rest. Therefore, this bill was necessary.

Of course, after the bill was passed and to this day, still the banks and other financial institutions try to undermine it and weaken it. The Volcker Rule, named for a former Chair of the Fed, was a provision in Dodd-Frank relating to the security of our economic system.

These notions that they are putting forth of making the Fed Chair a party hack is just so very wrong. I will just say this, again: In school you probably learned of fiscal policy, and that is what the Congress of the United States does. We create the budget of the United States. Fiscal policy is here, and monetary policy is at the Fed, establishing the rates in terms of relating to inflation.

Let's rid ourselves, disabuse ourselves of notions. Instead, we need serious ideas about how to make our economy work for the American people.

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