From Massie’s press release regarding the Federal Reserve Transparency Act of 2015:
“The Federal Reserve should not keep secrets from Congress,” said OGR member Congressman Massie, who introduced the bill on January 6th, 2015. “Ironically, the people who argue against an audit make the case for an audit by saying that transparency may affect the way the Fed operates. Congress created the Federal Reserve, so it is Congress’ responsibility to audit the Federal Reserve. Americans want and deserve more transparency.”
The Federal Reserve Transparency Act of 2015 would require the Comptroller General to conduct a full examination of the Federal Reserve System and how it sets monetary policy. The Federal Reserve makes decisions that affect the economy, yet the elected officials who represent the American people have limited insight into how the institution’s decisions are made.
At about 1 minute and 50 seconds into the video below, Massie delineates the many aspects of Federal Reserve operations in which GAO probes are prohibited that include operations and communications of the FOMC, and actions on monetary policy.
The main issue I see as begging attention is the Fed’s nebulous constitution. For all the many things it does do that it ought, there are many more that it should do, but does not, and even more that it ought not do, but may without the knowledge or consent of democratically accountable representatives.
For example, suppose the prevailing consensus was that the Fed’s balance sheet was too large by historical standards, and the FOMC decided that it needs to cut the size by half, and votes to do so over the course of one calendar quarter. Given the present condition of monetary policy, an implied inflation target that is too low, a generous implementation of IoR and reverse repo with no limit, the likely result would be pretty dramatic toward the side of bad outcome. And if one considers also, an institutional culture ingrained with a lack of accountability and failure to take responsibility for and correct mistakes, many scapegoats would arise from the ashes to become the subject of reams of misinformation, bad monetary theory, and controversy for years to come.
There is no law prohibiting such an action, no requirement that accountable persons in government be consulted, no proscribed consequences for bad results, no administrative remedy for mass stupidity, and no civil remedy for damages.
Of course, the tenor in Congress surrounding the issue says something about the performance of the Federal Reserve over the last decade or so, because, according to Massie’s statement, the transparency problem is nothing new. The problem was like the sleeping dog, or perhaps the sleeping 1000 lb. economic gorilla, that was awakened by ongoing, sheer incompetence of Fed bureaucrats. When one is paid simply for showing up to work, and performance simply doesn’t matter, it is likely to translate into the kind of care and devotion poured into the job, attracting those of all types of motivation, the public service-minded as well as self-serving narcissists.