May 11 2010
U.S. Senator Richard Shelby (R-Ala.), today spoke on the Senate floor in support of amendments to the financial reform bill to provide greater transparency for taxpayers into the actions of the Federal Reserve. Shelby supported the Sanders amendment, which passed by 96-0; he also supported the Vitter amendment, which failed by 37-62.
“Mr. President, I rise today to support the Sanders Amendment to bring transparency to the Federal Reserve.
“This amendment is needed because the Federal Reserve has abused its independence. It has repeatedly assumed and exercised vast fiscal powers under the guise of monetary policy. It has sought to escape accountability for these actions by claiming that its independence places it beyond the scope of Congressional oversight.
“To allow any agency to exercise the immense powers now wielded by the Fed with so little accountability is simply incompatible with our Constitutional system of government.
“Mr. President, Congress granted the Federal Reserve independence with respect to monetary policy on grounds that monetary policy was a technical, non-political task that did not put taxpayers at risk.
“Unfortunately, the Fed has failed to stay within the limits envisioned by Congress.
“Over the past three years, the Fed’s balance sheet has exploded to more than $2.3 trillion with much of the increases related to actions that had little to do with monetary policy, and more to do with bailouts, fiscal policy, and politics.
“Although the Fed likes to pretend that it is independent and removed from politics, the reality is that the Board of Governors is one of the biggest political players in town.
“Ironically, while the Fed is fighting this amendment, the Fed remains silent about other measures that would compromise its independence. Why? Politics.
“When it serves its politics, the Fed is happy to selectively sacrifice its independence. For example, the Dodd bill compromises the Fed’s independence by having the Fed directly fund the Democrats new consumer bureaucracy.
“This establishes a dangerous precedent. Anytime Congress needs a funding source it can now go outside the budget process and have the Fed print money.
“Yet, the Fed has remained remarkably quiet. Why? Politics.
“The Fed’s silence should come as no surprise given the close political ties between the Board of Governors and the Obama Administration.
“The Board of Governors has clearly decided to help the Obama Administration advance its legislative goals.
“Mr. President, the Fed cannot have its cake and eat it too.
“If the Fed wants to be independent, the Fed should defend its independence consistently, but otherwise should stay out of politics.
“On the other hand, if the Fed wants to be political, it should not expect Congress to treat it as ‘independent.’ Nor should the Fed expect that its non-monetary policy actions are exempt from Congressional oversight.
“These activities, even when conducted by the FOMC, are fiscal or regulatory actions that involve taxpayer dollars and policy judgments.
“They are no different than other policy decisions made by the Executive Branch. Accordingly, Congress has a Constitutional duty to oversee these activities.
“Unfortunately, the Fed often acts like Congress should be kept in the dark. It uses its independence as a shield to hide its actions from Congressional oversight, including its bailouts of AIG and Bear Stearns.
“No agency should have the fiscal and regulatory powers exercised by the Fed and not think that it has to be fully accountable to Congress.
“It is my hope this amendment will be the first step in moving the Fed back to its more limited and traditional role in our regulatory and Constitutional systems.
“Thank you Mr. President.”