[Congressional Record Volume 158, Number 112 (Wednesday, July 25, 2012)]
[Extensions of Remarks]
[Page E1322]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        FEDERAL RESERVE TRANSPARENCY AND POLITICAL INDEPENDENCE

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                             HON. PAUL RYAN

                              of wisconsin

                    in the house of representatives

                        Wednesday, July 25, 2012

  Mr. RYAN of Wisconsin. Mr. Speaker, in response to the recession and 
financial crisis, the Federal Reserve 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 took emergency 
actions to rescue individual companies and launched 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 the Fed's 
actions. That is why I voted in favor of H.R. 459, the Federal Reserve 
Transparency Act.
  However, I do want to register my caution about opening up the Fed's 
monetary policy deliberations and actions to a government audit as it 
could erode the Fed's political independence. 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 weaken our currency.
  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 mandate is the best way to 
achieve the desirable ends of sustainable economic growth, job 
creation, and low inflation.

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