March 03, 2015

Shelby Statement at Hearing on Federal Reserve Accountability and Reform

WASHINGTON, DC – Tuesday, March 3, 2015 – U.S. Senator Richard Shelby (R-Ala.), Chairman of the United States Senate Committee on Banking, Housing, and Urban Affairs, today delivered the following opening remarks during a full committee hearing on “Federal Reserve Accountability and Reform.”

The text of Chairman Shelby’s remarks, as prepared, is below.  

“Last week, the Committee began examining potential reforms to the Federal Reserve System.  We heard the views of Federal Reserve Chair Janet Yellen on this topic.

“Today, we will further explore options to improve the oversight and structure of the Fed. 

“Many of the Fed’s actions since the financial crisis have emphasized the need for greater accountability.  The Fed has undertaken three rounds of quantitative easing and grown its balance sheet to a staggering $4.5 trillion.

“Although the Fed has concluded new bond purchases, it has not begun to unwind its balance sheet.  It has also kept its target interest rate close to zero percent for more than six years.   

“After these unprecedented actions, how will the Fed measure its impact on the economy?

“It is not entirely clear.  Considering the extent of the monetary stimulus and the risks involved, the Fed should be prepared to explain this.

“And, what indicators will the Fed use to determine the appropriate time to unwind its balance sheet?  Again, it is not clear.

“The Fed should not only be able to answer these questions, it should be held accountable for its actions. 

“Federal Reserve officials have stressed the importance of the Fed’s independence.  But, such independence does not mean that it is immune from Congressional oversight.  After all, Congress wrote the statute that created the Fed and sets forth its policy objectives.

“Last week, Chair Yellen testified before this Committee that she believes the current structure of the Federal Reserve System is working well.  The current structure, however, has allowed the Fed to expand its reach in many ways. 

“The Fed’s jurisdiction now covers almost every aspect of the financial system.  Much of the expansion in its authority has been centralized in Washington, DC and New York.  

“The Fed now has extensive new rulemaking power which gives it the ability to regulate entities it did not before the crisis.

“Dodd-Frank greatly expanded the regulatory reach of the Federal Reserve.  It did not, however, examine whether it was correctly structured to account for these new and expansive powers.  Therefore, the Committee will be examining the appropriateness of the Fed’s current structure in a post Dodd-Frank world.

“As part of this effort, we will review proposals aimed at providing greater clarity in Fed decision-making and at reforming the composition of Federal Reserve System.  I have asked for the input of the Federal Reserve Banks and welcome their feedback in the coming weeks. 

“Today, I look forward to hearing from the witnesses on proposals to reform or restructure the Fed.  We have a very distinguished panel of experts before us and I thank them for being here.

“The United States Congress created the Federal Reserve System to perform a specific set of functions.  While the Fed is an important institution, it is not beyond the reach of Congressional oversight.  Therefore, it is entirely appropriate that Congress periodically review the Fed’s structure and authorities. 

“If we believe changes are necessary, changes should be made.  Thank you.”