A group of Nobel Prize-winning economist and former senior policy officials announced this week that they support the Fed Oversight Reform and Modernization Act (H.R. 3189), which calls for increased transparency and accountability from the nation’s central bank, according to an announcement from the House Financial Services Committee.
The bill passed in the House in November with bipartisan support by a 241 to 185 margin despite Fed Chair Janet Yellen’s letter of protest sent to Speaker of the House Paul Ryan and House Democratic Leader Nancy Pelosi on the eve of the vote urging them to reject the bill.
Rep. Jeb Hensarling (R-Texas), Chairman of the House Financial Services Committee, announced the support for the FORM Act during Yellen’s testimony before the Committee earlier this week. Yellen also testified before the Senate Banking Committee this week. The three Nobel Prize winners to offer their support were Lars Peter Hansen (University of Chicago), Robert Lucas (University of Chicago), and Edward Prescott (Arizona State University).
“So, Chair Yellen, we have three Nobel Prize winners in economics, a host of former Federal Reserve officials, some of the most renowned and respected economists in the country pretty much disagree with everything that you asserted in your three-page missive against the FORM Act,” Hensarling said before the Committee this week. “I know you're not a fan, but I would just caution you, Chair, that when you use such apocalyptic and hyperbolic language, you might consider whether or not this undercuts your credibility as Fed chair.”
The FORM Act requires the Fed to transparently communicate its monetary policy decisions to the American people by requiring the Fed to generate a monetary policy strategy of its own choosing, in order to provide the American people with more transparency about the factors that lead to the Fed’s monetary decisions. The Act would also eliminate the restrictions on the Government Accountability Office (GAO)’s ability to audit the Fed, allowing the GAO to conduct an audit of the Fed anytime there is a policy change. The bill is sponsored by Rep. Bill Huizenga (R-Michigan), who is the House Monetary Policy and Trade Subcommittee Chairman.
“In no way would the legislation compromise the Fed’s independence,” the economic luminaries wrote in their letter supporting the FORM Act. “On the contrary, publically reporting a strategy helps prevent policy makers from bending under pressure and sacrificing independence. It strengthens independence by reducing or removing pressures from markets and governments to finance budget deficits or deviate from policies that enhance economic stability.”
The White House issued a statement in November on the FORM Act, saying that “If the President were presented with H.R. 3189, his senior advisors would recommend that he veto the bill.”
Click here to view the letter of support for the FORM act along with a list of signatories.