Posted by
Andrews on Sunday, November 29, 2009 4:50:56 PM
In my post "
From Bad to Worse", I mentioned the proposal to lift the ban on congressional review of Federal Reserve interest rate decisions. I argued that such review would inevitably be used to shift control of such decisions from the Fed to congress and, however bad the Fed might be, that congressional control would be worse.
In reading the article again, I see that Ron Paul, who suprisingly supports such a move, says (as paraphrased by
the article's author):
Paul maintains the repeal would bring more transparency and
accountability, and notes it contains language that states it should
not be construed as interference in or dictation of monetary policy by
Congress.
This is just not believable, and if Paul believes this statement, he really has lost it.
Think of it this way, if every time you raise interest rates congress immediately calls a hearing and asks countless hostile questions, and whenever you lower rates, congress does nothing, would you consider that "free of interference"? Would you not get the message pretty quickly?
Now, granted, the bill as it stands now doe snot give congress the ability to interfere, but how long will that stand? What is the point of review without the ability to intervene? I doubt such a review proposal would make it all the way through both houses without having some sort of regulatory powers being tacked on. But even if it does come about without any regulatory powers, I think the implicit threat will be enough to cow the Fed. If they are under constant review, receive endless hostile questions, they will recognize the threat, "do what congress wants, or we will enact some real regulatory laws."
I just can't believe that anyone, especially someone as long in congress as Ron Paul, cannot see that such "oversight" legislation carries with it a lot of potential to interfere with supposedly independent decisions.
POSTSCRIPT
For those who doubt me, look at all the industries called to congressional hearings. Despite the fact that congress has no explicit ability to regulate many of them, have you noticed how hostile congressional hearing often spurs action? Why is that? Because of the implicit threat that inaction will lead to legislation. And the Fed will get the same message.