Federal Reserve Transparency Billby Senator Dean Heller
Posted on 2016-01-12
HELLER. Mr. President, I come to the floor today to offer my
strong support for the legislation we are debating today that would
finally audit the Federal Reserve.
Since I came to Congress, I have supported auditing the Fed. When I was first elected to the House of Representatives, I would attend briefings hosted by Congressman Ron Paul, Senator Paul's father, and I learned why more accountability and transparency was needed at the Fed.
I remember talking to Congressman Paul on the House floor about various issues at the Fed, and that is when I started to support this bill to audit the Fed, just as I am supporting his son's bill today. I thank Senator Paul for continuing to take up this cause and for building the momentum to audit the Fed that has led us to where we are today.
Since its founding, the Federal Reserve has often operated in secrecy, even though it is the biggest influence on our country's economy. The Fed's actions affect every American family and their hard- earned income. I am fortunate to be chairman of the Economic Policy Subcommittee on the Senate banking committee, where I have direct oversight over the Federal Reserve's monetary policies. I can say that the Federal Reserve's actions warrant passage of this legislation. For several years we have seen unprecedented monetary and regulatory policies come from the Fed. One of the riskiest policies I have ever seen is the Fed's stimulus program of quantitative easing. The Federal Reserve essentially turned on their computers, fired up their electronic printing presses, created new money out of thin air, and started to buy assets.
Now, we may ask ourselves this: How big is this stimulus program? It is an unbelievable number. As of today, it is nearly $4.5 trillion. Let me say that again: $4.5 trillion. And that is with a ``t.'' That is more than four times the cost of President Obama's own failed stimulus program. And who has benefited from this quantitative easing? I can tell you in two words: It is Wall Street. That is right. Wall Street hit the jackpot because the Fed's easy money policies drove everybody into the equities market to get any return they possibly could on their investments. Wall Street won, and Main Street, savers, and workers lost.
The scary part is the Fed won't rule out buying more assets in the future. If we ask the Fed today when or how they would begin to reduce their $4.5 trillion balance sheet, there is nothing but silence. Is that being transparent? Is that accountability? No, absolutely not. This is just one of the reasons why we must pass this bill to audit the Fed.
I find it ironic that the Federal Reserve is so opposed to being audited, because they themselves go around auditing lending institutions all the time. I frequently hear from community lenders in Nevada who have either the Federal Reserve, the FDIC, the National Credit Union Administration or the Consumer Financial Protection Bureau knocking on their door all the time. These community lenders have not caused the financial crisis, yet they are the ones feeling the brunt of all these audits. Why should there be a double standard that government agencies can examine every American's bank account but the American public can't examine those same agencies back? Again, this is why we must pass this legislation to audit the Fed.
I remind my colleagues that even though most of the news about the Fed revolves around interest rates and the Fed's monetary policy, the Fed is also responsible for major regulations that touch on almost every aspect of our financial system. Now, I support reasonable regulations, but only after thoughtful and careful evaluations. I think it should be mandated that the Fed conduct a cost-benefit analysis of all their proposed regulations and always allow for public comment on proposed regulations.
I am also very concerned that the Fed is getting involved in financial sectors in which they have not been in the past. We have a long tradition here in the United States of having a time-tested and effective State-based insurance regulatory system. Unfortunately, Dodd- Frank has changed all that, and now the Federal Reserve has new authorities over the insurance sector.
Right now, as we speak, the Fed is attempting to regulate capital standard requirements for insurance companies in the United States. This will be the first time the Federal Government imposes domestic Federal capital standards on the State-regulated insurance industry.
I worked very hard to ensure bank-centric standards are not inappropriately applied to the insurance industry by the Fed. But not only does the Fed want to add their own domestic layer of rules on top of State-based insurance regulations, they even want another layer of one-size-fits-all international capital standards on top of that. I almost have to laugh, because it is only in Washington, DC, where a Federal agency can put the trailer in front of the truck.
Unfortunately, that is exactly what the Fed is doing by working on international capital standards before they [[Page S48]] complete their own domestic standards. I have serious concerns about these international efforts. Together with Senator Tester of Montana, we introduced the bipartisan International Insurance Capital Standards Accountability Act, which would compel the Federal Reserve and the Treasury Department to complete a study on consumers and markets in the United States before supporting any international insurance proposal or international insurance capital standard.
These are just a few of the examples of some of the Fed's questionable actions. As I said earlier, this legislation to audit the Fed is critical to bring transparency and accountability to the Fed, but even more fundamental changes need to be made.
A few months ago, Chairman Shelby put together an impressive bill that the Senate Banking, Housing, and Urban Affairs Committee passed with my support, which would make important reforms to the Fed. One provision would establish a commission to study the potential restructuring of the districts in the Federal Reserve System. Chairman Shelby's bill would also require the Fed's Federal Open Market Committee to make more frequent and detailed reporting requirements to Congress and to increase transparency by reducing the time lag for Federal Open Market Committee transcripts from 5 years to 3 years. These are very reasonable changes that I think Democrats and Republicans alike can support, and I hope that Chairman Shelby's bill will be brought to the Senate floor soon.
The Federal Reserve recently celebrated its 100th anniversary, and in many aspects the Fed has not changed much since Woodrow Wilson's time. As most of us know, a few months ago we cut a very specific dividend that banks receive for buying stock of the Federal Reserve System in order to pay for the highway bill. While the debate mostly centered on how to cut the dividend, I was trying to figure out why the Federal Reserve requires banks to buy these so-called stocks to begin with. After all, it doesn't look like the Fed is in desperate need of funds, because over the past half dozen years the Fed has sent nearly half a trillion dollars of profits to the U.S. Treasury.
One hundred years ago, these stock purchases and dividends were meant to incentivize banks to join the Federal Reserve System. Since that time, laws have been passed that essentially don't give a bank the choice as to whether or not they want to be supervised by the Federal Reserve System because, by law, the Fed has gained authority over all banks that are eligible for FDIC insurance. Just because something was standard practice over 100 years ago does not mean it is still needed today. I think it is time to review and examine these Federal Reserve membership requirements even further.
My colleagues, it is essential that Congress exercise its constitutional responsibility to conduct oversight and scrutinize of the Federal Reserve in an open and transparent way, which is why I will proudly vote today to move forward with auditing the Fed, and I encourage my colleagues to join me.
I yield the floor.
The PRESIDING OFFICER. The Senator from Ohio.