[Congressional Record Volume 155, Number 186 (Friday, December 11, 2009)]
[Extensions of Remarks]
[Page E2969]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         WALL STREET REFORM AND CONSUMER PROTECTION ACT OF 2009

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                               speech of

                             HON. PAUL RYAN

                              of wisconsin

                    in the house of representatives

                      Wednesday, December 9, 2009

       The House in Committee of the Whole House on the State of 
     the Union had under consideration the bill (H.R. 4173) to 
     provide for financial regulatory reform, to protect consumers 
     and investors, to enhance Federal understanding of insurance 
     issues, to regulate the over-the-counter derivatives markets, 
     and for other purposes:

  Mr. RYAN of Wisconsin. Madam Chair, H.R. 4173, The Wall Street Reform 
and Consumer Protection Act of 2009, presents a host of new financial 
rules and regulations and even establishes a new Federal agency, with 
an advertised goal of minimizing the risk of a future economic crisis 
like the one we've seen over the past 2 years. But Congress could go a 
long way toward preventing such damaging boom and bust cycles by 
changing its existing mandate for one of the most important stewards of 
our economy: the Federal Reserve. The Humphrey Hawkins Full Employment 
Act of 1978 directed the Fed to focus on two goals that are often at 
odds: maximizing employment over the short-run while guaranteeing price 
stability over the long-term. This dual mandate has put the Fed in an 
impossible situation with regard to managing the economy. Multiple 
goals that may sometimes be in conflict can increase the chance of an 
important miscalculation. Monetary policy, in fact, played a key role 
in this latest economic crisis. The Federal Reserve held interest rates 
too low for too long earlier this decade, sparking an expansion of 
credit that fueled a housing bubble that eventually burst and caused an 
all-out crisis. As we emerge from this recession, I fear that we may be 
on the cusp of yet another damaging cycle. If the Fed is too slow to 
act in withdrawing its substantial stimulus as the economy recovers, we 
will end up with a nasty bout of inflation in the coming years. And the 
Fed would then have to slam on the brakes and hike interest rates to 
wring inflation out of the system, costing growth and jobs in the 
process.
  We need to stop this roller coaster ride. That is why I offered an 
amendment to this bill that would repeal the Humphrey Hawkins Act and 
make price stability the Fed's sole mandate. This change is meant to 
re-focus the Fed on its core mission and make sure that we get one of 
the key fundamentals of the economy right. Price stability, after all, 
is a necessary precondition for economic growth, job creation and sound 
money. A focused and clear mandate from Congress would also increase 
the Fed's transparency and accountability at a time when many are 
seeking more information about the actions of our central bank. 
Unfortunately, my amendment was not made in order by the Rules 
Committee.
  In response to the recent crisis, the Fed has had to take a variety 
of unorthodox measures to stabilize our credit markets and resuscitate 
the economy. Many in Congress have felt unease as the Fed has taken 
emergency actions to rescue individual companies and launch a variety 
of new credit facilities for an increasing number of banks, financial 
institutions and even investors. I share this unease and I believe that 
Congress should have the ability to gather information about these 
actions and new facilities, with appropriate safeguards and time lags. 
But I also believe that we must preserve the existing restrictions on 
opening up monetary policy deliberations and actions to a government 
audit. Even the appearance of politicians gaining some measure of 
influence over monetary policy decisions could have disastrous 
consequences. Political independence is not simply a luxury for our 
central bank. It is a core principle of good economic policy that 
yields real benefits for the American people. A number of empirical 
studies have shown that countries with independent central banks tend 
to have steadier economic growth and low and stable rates of inflation. 
This is not surprising. Just as politicians involved in fiscal policy 
have a bias toward greater spending, monetary policy influenced by 
politics would have a bias toward looser credit over the short term and 
therefore higher rates of inflation over the longer term. Financial 
markets would immediately recognize this and push up our borrowing 
rates and further weaken our currency.
  As we move forward in this process of financial regulatory reform, 
Congress should strive for robust oversight of the Fed, but it must 
guard against political interference. In the end, an independent 
Federal Reserve with a clear and focused single mandate is the best way 
to achieve the desirable ends of sustainable economic growth, job 
creation, and low inflation.

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