Monday, November 18, 2013
Ms. Yellen said she strongly opposes legislation to audit the Fed if it allows Congress to scrutinize and pressure the central bank’s internal deliberations over interest rates and monetary policy. Sen. Rand Paul, Kentucky Republican, is pushing a bill that would give congressional watchdogs authority to audit such internal deliberations, and is demanding a vote on the bill as the price of allowing the Senate to vote on Ms. Yellen’s nomination to become the Fed’s next chairman in January.
“I would object to legislation that would subject the Fed to short-term pressures that would affect its independence,” she told the Senate Banking Committee. It was her first appearance before Congress since President Obama last month nominated her to replace current Chairman Ben S. Bernanke, who is scheduled to depart Jan. 30.
“We’re one of the most transparent central banks in the world,” she said. “But I would not support anything that diminishes [the Fed‘s] independence. … For 50 years, Congress has recognized that there should be an exception to the [General Accountability Office‘s] ability to audit” federal agencies when it comes to the Fed’s highly sensitive monetary deliberations, which are closely followed and regularly move financial markets all over the world, she said.
Longtime Fed-watchers said Ms. Yellen’s poised performance made the hearing a resounding success for the nominee to what some have called the second-most powerful office in the world.
Ms. Yellen stressed repeatedly that she sees the Fed’s priority as nurturing the fragile economic recovery with ultra-easy monetary policies and near-zero interest rates until the economy and labor market show enough vigor to keep recovering on their own.
“I consider it imperative that we do what we can to promote a very strong recovery,” she said. “We can’t have normal rates unless the economy is normal.”
Liberal Democrats on the committee generally praised Ms. Yellen, but complained that wealthy investors seem to be the main beneficiaries thus far of the Fed’s stimulative policies, which have sparked stellar gains in the stock market. Ms. Yellen stressed that the Fed’s goal has been to help ordinary Americans, and it has been doing so by helping to ignite a robust recovery in the housing market that is increasing the assets and well-being of the middle class as well as the rich.
Ms. Yellen was treated deferentially by committee Republicans, but nearly all of them questioned her closely on the Fed’s loose money policies. Many complained that the Fed’s program of purchasing $85 billion a month of U.S. Treasury bonds and mortgage-backed securities has the potential to stoke high inflation and financial bubbles, has yet to spark a strong recovery, and will be difficult for the central bank to end.
“I worry that we’re on a sugar high,” said Sen. Mike Crapo, Idaho Republican. “That’s dangerous for the little person out there who’s trying to pay his bills and put away a little for retirement.”
Several Republicans contended that Fed already has already created a bubble in the U.S. stock and bond markets — something which Ms. Yellen vehemently denied. The S&P 500 has surged by 25 percent so far this year, and is up by 163 percent since touching a 12-year low in March 2009.
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