[Congressional Record Volume 156, Number 4 (Friday, January 15, 2010)]
[Extensions of Remarks]
[Pages E34-E35]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
H.R. 4173, ``THE WALL STREET REFORM AND CONSUMER PROTECTION ACT OF
2009''
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HON. MELVIN L. WATT
of north carolina
in the house of representatives
Friday, January 15, 2010
Mr. WATT. Madam Speaker, I would like to submit the following
information on H.R. 4173:
[From the Washington Post, Dec. 19, 2009]
The House of Representative's Reform Package Hurts the Fed's
Independence
The House of Representatives has passed a comprehensive
financial regulatory reform package. It creates a consumer
protection agency for financial services and establishes a
mechanism for resolving failed, systemically important
institutions. Agree or disagree with the particulars, there
is no disputing the bill's significance. Certainly President
Obama has made reform one of his top priorities. The Senate,
of course, has yet to weigh in, and it will probably be
months before Mr. Obama has legislation on his desk. Yet if
the House bill did come to him, he should veto it, for one
reason: Whatever good it might do would be canceled out by
the inclusion of Texas Republican Ron Paul's proposal to
subject the Federal Reserve's monetary policymaking to
regular audits by the Government Accountability Office, an
arm of Congress.
Supporters suggest that the measure would merely provide
``transparency'' for a secretive, powerful institution. But
for all its wide, bipartisan backing, this is anything but a
prudent or centrist law. In fact, it is an attack--born of
crisis and the attendant emotions--on the political
independence the central bank must have to do its job.
The case for political independence at the Fed is
elementary. Elected officials, such as members of Congress,
are inherently loath to tighten the supply of money available
to their constituents, even when that might be necessary to
fight inflation. U.S. experience, and that of countries
around the world, confirms this, which is why Congress
exempted the Fed's money-supply decisions from GAO scrutiny
in a 1978 law. Mr. Paul's proposal would effectively repeal
that. Investors already spend enough energy and money trying
to figure out where interest rates are heading without this
additional dose of permanent uncertainty. Trust in the Fed,
and, by extension, the dollar, will evaporate if markets
believe that the Fed is courting the approval of Congress's
auditors.
Mr. Paul doesn't care; he's an ``end the Fed'' man. In the
past, other members of Congress have basically just humored
him. It's a sign of the times--and not a good one--that they
have been Fed-bashed into following him now. To be sure, the
Fed may have been lax as a bank regulator. Monetary policy
under former chairman Alan Greenspan was, in hindsight, too
loose. Both failures contributed to the current crisis--
during which the Fed has ventured into new and unorthodox
areas to stave off depression, thus unavoidably politicizing
itself. Under Chairman Ben S. Bernanke, the central bank has
corrected some regulatory errors. It is aware of the
politicization risk posed by its current monetary policies
and seemingly is eager to undo them as soon as it safely can.
This week, the Fed announced that it will phase out special
lending programs for money market mutual funds, short-term
corporate lending and investment banks by Feb. 1.
Mr. Paul's cure is worse than the Fed's ills, real or
alleged. The central bank is already more transparent than
the Fed-bashers let on: It produces an annual report; the
chairman testifies before Congress; it releases, with some
delay, the minutes of its policy meetings. We hope cooler
heads prevail in the Senate, though a similar measure has 31
co-sponsors there. If not, Mr. Obama will have to get out his
veto pen. In fact, it might save everyone a lot of trouble if
he made that intention clear right away.
View all comments that have been posted about the article.
____
Open Letter to Congress and the Executive Branch
Representatives Ron Paul and Alan Grayson have put forward
an amendment, under the banner of increasing the Federal
Reserve's transparency and accountability, to subject the
Fed's monetary policy and discount-lending actions to an
audit by the Government Accounting Office (GAO). This
amendment, which has just been voted out of the House
Financial Services Committee, is an attempt to undermine the
Fed's independence which will worsen economic policy and
macroeconomic outcomes, particularly on inflation.
Economic theory and a massive body of empirical evidence
provide strong support for the independence of central banks
in their conduct of monetary policy. Subjecting central banks
to short-run political pressure impairs the credibility of
their commitment to maintaining low and stable inflation,
with an outcome of higher and more volatile inflation,
interest rates, and unemployment. This has happened over and
over again in the past, not only in the United States but in
many other countries throughout the world.
The Fed's independence gives it credibility in fighting
inflation which stabilizes inflation expectations. During
this crisis this credibility allowed the Fed to take
extraordinary action to prevent the recent financial market
disruption from causing a possible depression without
triggering inflation. Eventually the Fed will have to scale
back its unprecedented monetary accommodation. When the Fed
seeks to begin tightening monetary conditions, it must be
allowed to do so without political interference. Weakening of
the Fed's independence now might raise inflation risk, which
would cause borrowing costs to rise and would lower prospects
for a strong economic recovery.
We believe that the Paul/Grayson amendment will
substantially weaken the Federal Reserve's independence and
will do serious harm to the economy, particularly at this
critical juncture. We recommend that it not be adopted in any
Congressional legislation.
Ricardo Caballero, Massachusetts Institute of Technology;
Kenneth French, Dartmouth College; Robert Hall, Stanford
University; Anil Kashyap, University of Chicago Booth School
of Business; Pete Klenow, Stanford University; Frederic
Mishkin, Columbia University; Thomas Sargent, New York
University; Michael Woodford, Columbia University; Andrew
Abel, Wharton School of the University of Pennsylvania; Daron
Acemoglu, MIT; Viral Acharya, New York University Stern
School of Business; Stefania Albanesi, Columbia University;
Laurence Ales, Carnegie Mellon University; Alberto Alesina,
Harvard University; Robert M Anderson, UC Berkeley; Kathryn
Anderson, Vanderbilt University; Boragan Aruoba; University
of Maryland; Paul Asquith, Massachusetts Institute of
Technology; Jeremy Atack, Vanderbilt University; Alan
Auerbach, University of California, Berkeley.
Costas Azariadis, Washington University in St. Louis; David
Backus, NYU; Martin Baily, The Brookings Institution; Brad
Barber, UC Davis; David Bate, University of Iowa; William
Baumol, New York University; Charles Becker, Duke University;
David Beim, Finance and Economics, Columbia Business School;
Geert Bekaert, Columbia University; Ola Bengtsson, University
of Illinois; Dan Bernhardt, University of Illinois; Jagdish
Bhagwati, University Professor, Columbia University; Alan
Blinder, Princeton University; Nick Bloom, Stanford; Patrick
Bolton, Columbia University; George Borts, Brown University;
Phillip Braun, University of Chicago; Bruce Brown, Cal State
Polytechnic Univ. Pomona; Clair Brown, University of
California, Berkeley; Gardner Brown, University of
Washington.
Stephen Buckles, Vanderbilt University; Eric Budish,
University of Chicago Booth School of Business; Francisco
Buera, University of California at Los Angeles; Jeremy Bulow,
Stanford Business School; Craig Burnside, Duke University;
John Campbell, Harvard University; Miltiades Chacholiades,
Georgia State University; Joseph Chen, University of
California, Davis; Yu-chin Chen,
[[Page E35]]
University of Washington; Martin Cherkes, Columbia
University; Pierre Andre Chiappori, Columbia University;
Lawrence Christiano, Northwestern University; Russell
Chuderewicz, Penn State University; Sanjay Chugh, University
of Maryland; Timothy Cogley, New York University; Olivier
Coibion, College of William and Mary; Shawn Cole, Harvard
Business School; Pierre Collin-Dufresne, Columbia University.
Diego Comin, Harvard; Michelle Connolly, Duke University;
Thomas Cooley, New York University; Dora Costa, UCLA; Roger
Craine, University of California, Berkeley; Janet Currie,
Columbia University; Andrew Daughety, Vanderbilt University;
Steven Davis, University of Chicago Booth School of Business;
Davide Debortoli, University of California, San Diego;
Francesco Decarolis, University of Wisconsin, Madison;
Stefano DellaVigna, UC Berkeley; Wouter Dessein, Columbia
University; Phoebus Dhrymes, Columbia University; Peter
Diamond, MIT.
Douglas Diamond, University of Chicago Booth School of
Business; Francis Diebold, University of Pennsylvania;
Avinash Dixit, Princeton University; Allan Drazen, University
of Maryland; Robert Driskill, Vanderbilt University; Darrell
Duffie, Stanford University; Chris Edmond, NYU Stern;
Franklin Edwards, Columbia University; Sebastian Edwards,
UCLA; Martin Eichenbaum, Northwestern University; Theo
Eicher, University of Washington; Andrea Eisfeldt,
Northwestern University Kellogg School of Management; Michael
Elsby, University of Michigan; Charles Engel, University of
Wisconsin; Eduardo Engel, Yale University; Roger E. A.
Farmer, UCLA; Jon Faust, Center for Financial Economics,
Johns Hopkins U.; Jesus Fernandez-Villaverde, University of
Pennsylvania; T. Aldrich Finegan, Vanderbilt University
(Professor Emeritus); Michael Fishman, Northwestern
University.
Virginia Grace France, University of Illinois; Jeffrey
Frankel, Harvard University; Ken Froot, Harvard University;
Xavier Gabaix, NYU; Francisco Gallego, Pontificia Universidad
Catolica de Chile; Marc Giannoni, Columbia University; J.
Fred Giertz, University of Illinois at Urbana-Champaign;
Richard Gilbert, University of California, Berkeley; Simon
Gilchrist, Boston University; Yuriy Gorodnichenko, UC
Berkeley; Gary Gorton, Yale University; Francois Gourio,
Boston University; Daniel Graham, Duke University; William
Greene, New York University; Nathaniel Gregory, University of
Chicago Booth School of Business; Bronwyn Hall, University of
California at Berkeley; John Haltiwanger, University of
Maryland; Gary Hansen, UCLA; Lars Peter Hansen, University of
Chicago; Bruce Hansen, University of Wisconsin.
Gordon Hanson, UC San Diego; Milton Harris, University of
Chicago; Christian Hellwig, UCLA; Benjamin Hermalin,
University of California; Andrew Hertzberg, Columbia
University; Yael Hochberg, Northwestern University; Robert
Hodrick, Columbia University; Burton Hollifield, Carnegie
Mellon University; Takeo Hoshi, University of Califomia, San
Diego; Christopher House, University of Michigan; Peter
Howitt, Brown University; Chang-Tai Hsieh, University of
Chicago Booth School of Business; Glenn Hubbard, Columbia
University; John Huizinga, University of Chicago Booth School
of Business; Erik Hurst, University of Chicago; Saul H.
Hymans, University of Michigan; David Ikenberry, University
of Illinois at Urbana-Champaign; Ravi Jagannathan,
Northwestern University; Nir Jaimovich, Stanford University;
Urban Jermann, University of Pennsylvania.
Dana Johnson, Comerica Incorporated; Charles I. Jones,
Stanford University, Graduate School of Business; Marcin
Kacperczyk, New York University Stern School of Business;
Charles Kahn, University of Illinois; Steve Kaplan,
University of Chicago Booth.
Shachar Kariv, UC Berkeley/Economics; Anthony Karydakis,
Stern School of Business, New York University; Barbara Katz,
Stern School of Business, New York University; Peter Kenen,
Princeton University; Miles Kimball, University of Michigan;
Kent Kimbrough, Duke University; Patrick Kline, UC Berkeley;
Ralph Koijen, Chicago Booth; Samuel Kortum, University of
Chicago; SP Kothari, MIT; Kala Krishna, Penn State
University; Randall Kroszner, University of Chicago, Booth
School of Business; Finn Kydland, University of California,
Santa Barbara; David Laibson, Harvard University; Bruce
Lehmann, Graduate School of International Relations and
Pacific Studies, University of California, San Diego.
Jonathan Lewellen, Dartmouth College; Frank Lichtenberg,
Columbia University; Victor Lima, The University of Chicago;
Barton Lipman, Boston University; Adriana Lleras-Muney, UCLA;
Andrew Lo, MIT; Sydney Ludvigson, New York University; Louis
Maccini, Johns Hopkins University; W Bentley MacLeod,
Columbia University; Burton Malkiel, Princeton University;
Ulrike Malmendier, University of California, Berkeley; Paula
Malone, University of Michigan; Robert McDonald, Northwestern
University; Daniel McFadden, University of California,
Berkeley; Rajnish Mehra, University of California, Santa
Barbara; Marc Melitz, Harvard University; Allan Meltzer,
Carnegie Mellon University; Enrique Mendoza, University of
Maryland; Laurence Meyer, Macroeconomic Advisers; Frederic
Mishkin, Graduate School of Business, Columbia University.
Robert Moffitt, Johns Hopkins University; Enrico Moretti,
University of California, Berkeley; Stephen Morris, Princeton
University; Adair Morse, University of Chicago Booth School
of Business; Giuseppe Moscarini, Yale University; Kevin
Murphy, University of Chicago; Stewart Myers, MIT; Roger
Myerson, University of Chicago; Brent Neiman, University of
Chicago Booth School of Business; Maurice Obstfeld,
University of California, Berkeley; Brendan O'Flaherty,
Columbia University; Lee Ohanian, UCLA; Maureen O'Hara,
Cornell University; Claudia Olivetti, Boston University;
Martha Olney, U.C. Berkeley; Joseph Ostroy, UCLA; Stavros
Panageas, University of Chicago Booth School of Business;
Lubos Pastor, University of Chicago Booth School of Business;
Neil Pearson, University of Illinois at Urbana-Champaign;
Lasse H. Pedersen, New York University.
George Pennacchi, University of Illinois; Scott Perkins,
University of Illinois; George Perry, Brookings Institution;
Thomas Philippon, New York University; Monika Piazzesi,
Stanford University; Elizabeth Powers, University of Illinois
at Urbana-Champaign; Edward C Prescott, Arizona State
University; Giorgio Primiceri, Northwestern University;
Thomas Pugel, New York University Stern School of Business.
John Quigley, University of California, Berkeley; Valerie
Ramey, University of California, San Diego; John Riley, UCLA;
Michael Riordan, Columbia University; James Roberts, Duke;
Gerard Roland, UC Berkeley; Michael Rothschild, Princeton
University (Emeritus); Peter L. Rousseau, Vanderbilt
University; Juan Rubio-Ramirez, Duke University; Kim Ruhl,
NYU Stern School of Business; Lynne Sagalyn, Columbia
University.
Bernard Salanie, Columbia University; Seth Sanders, Duke
University; Allen Sanderson, University of Chicago; Tano
Santos, Columbia University; Paola Sapienza; Northwestern
University; Rafael Schiozer, University of Illinois at Urbana
Champaign; Richard Schmalensee, Massachusetts Institute of
Technology; Stephanie Schmitt-Grohe, Columbia University;
Myron Scholes, Stanford University, Emeritus; Frank
Schorfheide, University of Pennsylvania; John Shea,
University of Maryland at College Park; Robert Shiller, Yale
University; Robert Shiller, University of Chicago; Stephen
Shore, Johns Hopkins University; Kenneth Singleton, Stanford
University; Matt Slaughter, Dartmouth College; Jeffrey Smith,
University of Michigan; Lones Smith, University of Michigan;
Tony Smith, Yale University; Nicholas Souleles, The Wharton
School, University of Pennsylvania.
Chester Spatt, Carnegie Mellon University; Victor Stango,
University of California, Davis; Richard Startz, University
of Washington; James Stock, Harvard University; Marti
Subrahmanyam, New York University; Suresh Sundaresan,
Columbia University; Chris Telmer, Carnegie Mellon
University; Peter Temin, MIT; Michele Tertilt, Stanford
University; Duncan Thomas, Duke University; George Tolley,
University of Chicago; Robert Topel, University of Chicago;
Robert Townsend, MIT; Grace Tsiang, University of Chicago;
Stephen Turnovsky, University of Washington; Harald Uhlig,
University of Chicago; Martin Uribe, Columbia University;
Salvador Valdes-Prieto, Catholic University of Chile; Stijn
Van Nieuwerburgh, New York University Stern School of
Business; Hal Varian, UC Berkeley.
Carlos Vegh, University of Maryland; Laura Veldkamp, New
York University, Stern School of Business; Pietro Veronesi,
University of Chicago; Anne Villamil, University of Illinois;
Paul Wachtel, New York University, Stern School of Business;
Neng Wang, Columbia University; Mark Watson, Princeton
University; Shang-Jin Wei, Columbia Business School Chazen
Institute; Pierre-Olivier Weill, UCLA; David Weinstein,
Columbia University; E. Roy Weintraub, Duke University; Louis
Wells, Harvard Business School; Kenneth West, University of
Wisconsin--Madison; Diana Weymark, Vanderbilt, University.
Michael Whinston, Northwestern University; Mirko
Wiederholt, Northwestern University; Robert Willis,
University of Michigan; Daniel Wolfenzon, Columbia
University; Robert Wright, Augustana College SD; Jonathan
Wright, Johns Hopkins University; Randall Wright, University
of Wisconsin--Madison; Stephen Yeaple, Penn State University;
Stephen Zeldes, Columbia University; Stanley Zin, New York
University; Eric Zivot, University of Washington Dept of
Economics; Mark Zmijewski, University of Chicago Booth School
of Business.
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