No, don't 'audit the Fed'

The Government Accountability Office is currently authorized to audit all of the federal bank supervisory agencies, but with respect to the Federal Reserve such audits may not include review of “deliberations, decisions, or actions on monetary policy matters” or the “transactions made under the direction of the Federal Open Market Committee.” The bills would repeal these exclusions and others.

Are these changes necessary? The Federal Reserve is already the most transparent central bank in the world. After each meeting of the Federal Open Market Committee, the 12-member body that sets key interest rates, a statement is issued announcing any actions or decisions and which members voted for or against. Minutes of each FOMC meeting are issued several weeks later. Board governors and district bank presidents regularly give speeches and interviews on the policy changes being considered and the indicators that might trigger the Fed to make them. The Federal Reserve is hardly “cloaked in secrecy,” as Sen. Rand Paul has alleged.

The Fed chair and governors also appear periodically before congressional committees to answer questions about monetary policy and other economic matters. By law, the Federal Reserve Board delivers a report on monetary policy to Congress twice a year. If legislators want more Fed transparency, these hearings are the place to obtain it. If legislators truly care about the substance of monetary policy, their questions should focus on the objectives Congress has set for the Fed: long-run growth of the monetary and credit aggregates commensurate with the economy’s long-run potential, so as to effectively promote maximum employment, stable prices, and moderate long-term interest rates.