Sen. Brown Opening Statement at Banking Committee’s Hearing on Fed Reform and Accountability

WASHINGTON, D.C. — U.S. Sen. Sherrod Brown (D-OH) – ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs – released the following opening statement, as prepared for delivery, at today’s hearing entitled, “Federal Reserve Accountability and Reform.”

Brown’s remarks, as prepared for delivery, follow.

 

 

Thank you, Mr. Chairman.

 

 

The Federal Reserve System was designed to be accountable to Congress, and the American people, while maintaining the central bank’s independence. 

 

 

The Chair of the Federal Reserve Board is appointed by the President and confirmed, as are the other six Federal Reserve Board Governors. And the Chair is required to testify before Congress twice a year, as she did last week.

 

 

Over time, the Fed has also become more accountable to the public and the Fed’s operations are the most transparent they have ever been in its history. 

 

 

Various government agencies and an outside auditing firm regularly reviews and audits the Fed’s activities and financial statements, with important exceptions. 

 

 

After the crisis, the Fed began to issue regular reports to Congress on its lending programs.

 

 

In December 2010, the Fed released loan details for each emergency program created during the crisis. It publicly releases records on its discount window loans and open market operations with a two-year lag.  

 

 

And as a result of Wall Street Reform, the GAO audited the Fed’s emergency facilities and governance. 

 

 

The Federal Open Market Committee holds a press conferences four times a year to present its current economic projections and to provide context for its monetary policy decisions.

 

 

While I continue to have concerns about the slow pace of the recovery for most Americans, the FOMC’s monetary policy has allowed for sustained economic growth.

 

 

Some pundits and politicians have been critical of these steps, predicting runaway inflation for years, but our economy continues to gain jobs while prices remain stable.  

 

 

Under the guise of additional transparency and accountability, some are proposing to second-guess the decisions of an independent central bank.

 

 

The Federal Reserve certainly looms larger in our economy than it has in the past.  But the Fed’s extraordinary measures were the result of extraordinary excesses, and changing course to pursue only one part of the Fed’s mandate harms workers.

 

 

As a result of the crisis, the Federal Reserve gained new authorities over the nation’s largest banks, and non-bank firms designated as “systemically important.”   

 

 

If we learned anything from the financial crisis, it is that we all have a responsibility to remain vigilant in our oversight of Wall Street’s risk-taking.

 

 

Governor Dan Tarullo has called for capping on the non-deposit liabilities of the largest financial institutions as a way to end Too Big to Fail – a proposal similar to one that I introduced in 2010 and offered as an amendment to the Dodd-Frank Act that both Democrats and Republicans supported.

 

 

Mr. Chairman, we should hold a hearing on that proposal and give the Federal Reserve the authority to implement it.

 

 

And rather than attempting to interfere in, or even dictate, monetary policy, Congress should focus on whether the Federal Reserve is protecting consumers, ensuring safety and soundness, and strengthening the financial stability of our economy.

 

 

The Committee should consider if the current governance of the Federal Reserve System appropriately holds the regulators accountable and encourages diverse perspectives.

 

 

For example, the Reserve Bank Presidents are not presidentially appointed.  The Class A and Class B Directors of each of the Federal Reserve Bank Boards are either member banks or chosen by the member banks; the Class C directors are selected by the Board of Governors.

 

 

With independent and accountable leaders, diverse perspectives, and strong regulation, the Federal Reserve System can be responsive to the American public. 

 

 

This is where we should focus our discussion of reforms of the Federal Reserve System.

 

 

Some changes would require legislation, but some would not.

 

 

Mr. Chairman, we should be thoughtful and careful should we choose to proceed with any legislation.

 

 

Last, I want to welcome Dr. Kupiec and Dr. Meltzer back to the Committee.  Both testified at hearings Senator Toomey and I held last year in the Financial Institutions and Consumer Protection Subcommittee. 

 

 

Thank you, Mr. Chairman.

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