Congress could limit the Feds independence and hurt the U.S. economy
Congress could limit the Feds independence and hurt the U.S. economy
By David A. Singer February 13 at 8:00 AM
On Tuesday, Federal Reserve Chair Janet L. Yellen will testify before the Senate Banking, Housing and Urban Affairs Committee. On Jan. 31, Rep. Patrick T. McHenry (R-N.C.), vice chairman of the House Financial Services Committee, wrote a
scathing letter to Yellen. Citing the clear message by President Donald Trump to put America first, he called on her to cease all international negotiations on regulations covering bank capital, systemic risk and other areas, and suggested that the Fed had no authority to engage in such activities.
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Is Trump an authoritarian at heart? It matters less than you think.}
McHenry went on to call the Feds activities secretive, and suggested that its participation in international forums was killing American jobs. His letter echoes the heated rhetoric by President Trump during the campaign in which he said that Yellen should be
ashamed of herself for keeping interest rates low for political reasons.
Such intervention by elected leaders is alarming for two reasons. First, research suggests that it is an America first strategy for the Fed to coordinate international financial regulation. Second, the Fed is an independent agency, and congressional leaders have generally refrained from directly threatening a sitting chair. I will explain below.
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David A. Singer is associate professor of political science at Massachusetts Institute of Technology and the author of Regulating Capital: Setting Standards for the International Financial System (Cornell University Press, 2010).