Behind the House GOP’s unusually aggressive of Federal Reserve chairwoman Janet Yellen Wednesday lies a simple strategy: If Republicans can portray the Yellen Fed as politically-biased, they will undercut the criticism that their attempts to extend oversight of the Fed will destroy the Fed’s independence by politicizing it.
“When you see that there’s a lack of independence by the Fed, then all that argument goes off the table,” Rep. Scott Garrett said Thursday in an appearance on CNBC.
The New Jersey House member was among the Republican lawmakers whose tough questioning of Yellen Wednesday in her testimony before the House Financial Services Committee at times made Yellen visibly exercised.
Explaining his line of questioning, Garrett said that there is a “myth that’s been out there … that the Fed is somehow totally independent of partisan politics.” He said that “there is evidence of partisan interplay with regard to the Fed.”
During the hearing, Garrett cited seven instances of what he claimed were politicized activities, including Yellen meeting with Democratic officials and lawmakers and speaking out on income inequality days before the midterms.
Some of those activities were done under former chairman Ben Bernanke, who was nominated to the position by George W. Bush, not President Obama. But Garrett and other Republicans suggested during the hearing that they were indicative of a broader politicization of the Fed.
“You want to tell us, ‘I’m not getting involved in politics.’ But then again, two weeks before an election, you’re making political statements that are consistent with the Democrat Party,” said Rep. Sean Duffy, R-Wis., during the hearing.
In effect, Republicans are trying to turn the tables on their critics, who have warned against Republican-authored bills to increase congressional oversight of the Fed on the grounds that they would politicize the central banks. That includes legislation introduced by Sen. Rand Paul, R-Ky., that would have the Government Accountability Office audit the central bank’s monetary policy decisions.
Yellen was backed up in her defense of Fed independence from Congress and in her pushback against Garrett and others Thursday by Federal Reserve Bank president Loretta Mester. “I don’t think the Fed has become political,” Mester said in a separate interview on CNBC.
“I wish we were all as poised as Janet Yellen was yesterday at the hearing,” Mester added.
Nor are all GOP lawmakers on board with the effort to audit the Fed.
“I can’t imagine anything worse for the nation or for the free world than for Congress to get involved in monetary policy,” Sen. Bob Corker, R-Tenn., said Thursday in an interview with journalists for Bloomberg.
Nevertheless, it appears that many conservative lawmakers viewed Wednesday as part of a longer-term effort to change laws pertaining to the Fed.
Jeb Hensarling, R-Texas, chairman of the Financial Services Committee, indicated Wednesday that he plans to move legislation to require the Fed to spell out a predictable rule for monetary policy decisions and report to Congress whenever it departs from the rule. That bill, which is different from Paul’s measure, cleared the committee in the last Congress.
