[Congressional Record (Bound Edition), Volume 156 (2010), Part 1]
[Extensions of Remarks]
[Pages 177-179]
[From the U.S. Government Publishing Office, www.gpo.gov]




  H.R. 4173, ``THE WALL STREET REFORM AND CONSUMER PROTECTION ACT OF 
                                 2009''

                                 ______
                                 

                          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

[[Page 178]]

     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, 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;

[[Page 179]]

     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.

                          ____________________