July 21, 2012 (TSR) – Ron Paul’s bill before Congress to audit the U.S. Fed is due to come up on Tuesday and is expected to pass, but seen as unlikely to gain subsequent U.S. Senate approval.
The House of Representatives is expected to vote on Tuesday on a bill that would allow for a congressional audit of Federal Reserve monetary policy decisions, a senior House aide said on Friday.
The legislation proposed by Republican Representative Ron Paul, a long-time critic of the U.S. central bank and author of the book “End the Fed,” has already gathered 274 co-sponsors, virtually guaranteeing passage.
The Republican-led House will consider the bill under a fast-track procedure that requires a two-thirds majority, but nearly two-thirds of the House has already signed onto the bill.
Paul’s son, Republican Senator Rand Paul, has introduced a companion bill in the Democrat-controlled Senate, but chances of success are remote given a less critical view of the central bank in that chamber and a tight legislative calendar before congressional elections in November.
The Fed successfully stopped Ron Paul’s measure during congressional debate over financial regulatory reforms in 2010.
Fed Chairman Ben Bernanke told House lawmakers on Wednesday that the legislation would open the door to a “nightmare scenario” of political meddling in monetary policy.
“That is very concerning because there’s a lot of evidence that an independent central bank that makes decisions based strictly on economic considerations and not based on political pressure will deliver lower inflation and better economic results in the longer term,” Bernanke said.
Paul’s bill would direct the Government Accountability Office, an independent, nonpartisan congressional agency, to conduct a Fed review and would remove an exemption that monetary policy has enjoyed.
The central bank’s political standing has suffered since the financial crisis struck in 2007. Critics claim Fed policies benefited Wall Street more than Main Street, and many Republicans charge that the central bank is courting inflation with its efforts to lift the economy.
The Fed cut overnight interest rates to near zero in December 2008 and has held them there since. It has also bought $2.3 trillion in government and mortgage-related bonds in a further effort to press down borrowing costs.
Despite the Fed’s aggressive and unconventional monetary policy, the economic recovery is only limping along.
Growth slowed to just a 1.9 percent annual rate in the first three months of this year, and economists expect a report next Friday will show it slowed further to a 1.5 percent pace in the second quarter.