By Denny Gulino

WASHINGTON (MNI) – The House of Representatives is beginning an
afternoon of debate on whether to put itself on record in favor of
increased congressional influence on the Federal Reserve, the most
direct effort yet by lawmakers to impinge on decades of increased
central bank independence.

Riding a confluence of several anti-Fed themes including
post-crisis anger, Tea Party antipathy and some Republican perceptions
that Fed quantitative easing is helping President Barack Obama, the
House will vote on the measure Wednesday with a good chance of passage.

The bill, H.R. 459, is titled “The Federal Reserve Transparency
Act.” It would allow the Government Accountability Office to conduct a
“full audit” of the central bank. “Full” in this context means monetary
policy decisions and the mechanisms behind them would, for the first
time, be fair game for concurrent analysis by another arm of government.

For as long as the Senate is led by Democrats, the bill is sure to
remain bottled up in the Senate Banking Committee and fall short of any
full congressional approval — the main reason the measure is getting
relatively little attention.

Nevertheless, the fact it has come before the full House for a
vote, with the apparent unanimous support of Republicans as well as the
support of dozens of Democrats, is a historic high-water mark of
anti-Fed sentiment.

The debate promises to be a procession of lawmakers taking the
microphone to rail against the Fed, the economy and opposing political
ideology, with only a sprinkling of Fed defenders.

The details on what a new avenue of oversight would involve are not
specified in detail in the language of the bill. The GAO is given a year
to complete an “audit,” a word some analysts have said is being used as
a euphemism for interference in this case.

The bill is assumed to allow further congressional requests for
examinations of monetary policy, perhaps opening a regular channel for
congressional pressure, particularly following any controversial policy
moves.

Federal Reserve Chair Ben Bernanke, as recently as last week’s
testimony to Congress, repeated his opposition.

“I do feel it’s a mistake to eliminate the exemption from monetary
policy deliberations, which would effectively create a political
influence or a political dampening effect on the Federal Reserve’s
policy deliberations,” Bernanke said.

Bernanke’s objections were along the lines of those of his
predecessors, from Alan Greenspan — who said ongoing congressional
scrutiny would neutralize policy discussions — back to William
McChesney Martin. He famously resisted Lyndon Johnson’s explicit
objections to a 1965 rate hike that appeared to the White House to
jeopardize the Vietnam War effort and the War on Poverty.

But none of Bernanke’s predecessors faced the prospect of a
two-thirds majority of one chamber of Congress actually placing its
weight on the side of less Fed independence.

The bill will require 291 votes to pass and with 274 co-sponsors,
passage appears within reach, even though it would need the help of 50
Democrats.

For the bill’s author, Rep. Ron Paul, the bill represents the
culmination of three decades of attempts to, as the title of his 2009
book proclaims, “End the Fed.” Paul, whose presidential campaign gained
a surprising amount of traction before faltering with just 158
delegates, is retiring from Congress after this session.

In a C-SPAN interview earlier in the day, Paul said his intent is
not to increase congressional influence over monetary policy but to
force Congress to get along without a Fed backstop.

“This is the reason Congress is irresponsible,” he said. “They
always know the Fed is there,” ready to compensate for bad fiscal
policy.

“I don’t want the Fed to bail out the very super wealthy,” he said,
“and I don’t want Congress to print money and bail out every mortgage
holder.”

Why now has his measure been able to reach the floor of the House?
“Because of the crisis and the realization that the Fed is responsible,”
he replied.

Anyone who reads Internet comments that relate to Paul and his Fed
effort can see the extent of vigorous support he enjoys from a number of
directions as well as the depth of distrust many have of the Fed. Those
who blame the Fed for a variety of alleged economic sins often lump the
central bank together with the banking industry as a key cause of the
financial crisis.

The bill includes a provision that even Paul is not enthusiastic
about, a staff member told MNI: an order for the GAO to examine the
reasons behind every foreclosure in the country in 2009 and 2010. The
sweeping provision was inserted last month in a markup session by Rep.
Elijah Cummings, a Maryland Democrat.

If the House does approve H.R. 459 Wednesday, the bill’s prospects
in the Senate may remain for Election Day to determine. And then it will
ultimately be the voters who decide whether the Federal Reserve
Transparency Act enters the history books as a turning point for central
bank autonomy or a momentary testament to an underappreciation of the
Fed’s unique role in the economy.

“The younger generation, for some reason, is fascinated by this,”
Paul said of his efforts to dismantle the Fed. “Whether it will change
before I leave Congress or not, the attention keeps growing and
growing.”

** MNI Washington Bureau: 202-371-2121 **

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