As the GOP gears up to return to Capitol Hill with a new Republican majority, a long sought-after piece of legislation that would force a broad audit of the Federal Reserve may finally go up for vote in the Senate.
The legislation known as Audit the Fed has long been blocked in the Senate by Democratic leader Harry Reid, D-Nev., but with the new Republican majority, incoming Senate Majority Leader Mitch McConnell, R-Ky., says the bill will now earn a floor vote, The Washington Times reported.
While the bill has previously received overwhelming support in the House, passing twice, most recently in September with a 333-92 vote, it has encountered resistance not only in the Senate, but also with the Fed itself.
In December, Federal Reserve Chairwoman Janet Yellen told reporters that she will "forcefully" argue against any bill that attempts to audit the monetary policy decision-making of the Fed, The Hill reported.
"Back in 1978 Congress explicitly passed legislation to ensure that there would be no GAO [Government Accountability Office] audits of monetary policy decision-making, namely policy audits. I certainly hope that will continue, and I will try to forcefully make the case for why that's important," Yellen said.
The Fed would be less effective at its job if its long-term decisions were hampered by partisanship, or as Yellen referred to it, "short-run political interference."
"I do think central bank independence is very important ... to make sure we can make the decisions we think are best," she continued.
If passed, the bill would allow the GAO, an independent nonpartisan agency, to thoroughly review the Fed's monetary policy deliberations.
A partial audit of the Fed in 2011 revealed it had loaned $16 trillion to financial institutions, including more than $3 trillion to foreign banks, from 2007-2010.
Critics questioned why there was no public notice or congressional oversight of the loans, and many continue to call for the abolition of the Fed, suggesting that Congress gave up its constitutional responsibility to manage the U.S. money supply when the independent banking system was created in 1913, according to U.S. News & World Report.
Yellen maintains that she is "very open" to considering various ways the Fed can improve its transparency, saying, "We should be accountable, and we are accountable to Congress."
"The ability of the central bank to make the decisions about monetary policy that it regards as in the best longer run interests of the economy free of short run political interference is very important," Yellen continued. "History shows, not only in the United States but around the world, that central bank independence promotes better economic performance."
