Dear Mr. Lozancich:
Thank you for contacting me to express support for legislation to increase transparency at the Federal Reserve. I appreciate hearing from you, and I welcome the opportunity to respond.
I agree that the trillions of dollars deployed by the Federal Reserve to stabilize the economy should be accounted for. You may be interested to know that the Dodd-Frank Wall Street Reform Act (P.L. 111-203) included requirements for a complete audit of the Federal Reserve's emergency lending activities during the financial crisis. Specifically, this legislation required the Government Accountability Office (GAO) to publish a full audit of the loans and other assistance provided to financial institutions during the economic crisis. If you would like to read that report, it is available online through GAO's website at www.gao.gov/products/GAO-11-696. Additionally, this legislation gives GAO the ongoing authority to audit any future emergency lending activities.
Dodd-Frank did not authorize GAO to directly review key monetary policies such as the setting of interest rates. This restriction was maintained in order to protect the independence of the Federal Reserve Board of Governors to set monetary policy without undue political influence. I believe this legislation takes appropriate steps to promote transparency in the use of public funds without politicizing monetary policy.
Senator Rand Paul (R-KY) has introduced legislation that would require an additional audit of the Federal Reserve. The "Federal Reserve Transparency Act" (S. 209) would remove all existing restrictions on GAO audits, including confidentiality restrictions. I have some concerns that a more expansive audit, including a review of monetary policy, could prevent the Federal Reserve's Board of Governors from making key decisions free of outside political influence. This legislation is currently awaiting consideration in the Senate Committee on Banking, Housing, and Urban Development, of which I am not a member. However, please be assured that I will keep your support for this legislation in mind should it come before the full Senate for a vote.
Once again, thank you for writing. If you have any additional questions or concerns, please do not hesitate to contact my Washington, D.C. office at (202) 224-3841. Best regards.
United States Senator
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