Bill to revamp Federal Reserve expected on Thursday

Rep. Kevin Brady, R-Texas, is set to introduce the bill Thursday. Rep. Kevin Brady, R-Texas, is set to introduce the bill Thursday. Harry Hamburg/AP

Rep. Kevin Brady, R-Texas, plans to introduce a bill on Thursday that would dramatically reshape the Federal Reserve, offering a potential preview of future GOP efforts to reform the body.

The seven-part bill would, among other things, eliminate the employment-maximizing half of the Federal Reserve’s dual mandate, leaving it solely focused on stabilizing prices. That's necessary, said Brady, the top Republican on Congress’s Joint Economic Committee, because the dual mandate leads the Fed into uncharted territory and shifts its focus away from the tried and true.

“The experimentation that we’re seeing today has clearly mixed results,” Brady said at an American Enterprise Institute event on Monday. “But when the Fed focuses on preserving the purchasing price of the dollar ... it really does create a very solid foundation,” he said.

The bill received mixed reviews from the AEI-assembled panel, with former Fed Board of Governors member Donald Kohn taking issue with many of its provisions and former Federal Reserve Bank of Richmond President Alfred Broaddus saying, “By and large, it’s a very, very important proposal.”

The bill, dubbed the “Sound Dollar Act,” echoes a call from other congressional Republicans to divorce the Consumer Financial Protection Bureau from the Fed's budget and subject the new agency to the congressional appropriations process. Rep. Randy Neugebauer, R-Texas, has already introduced a bill to do just that. The CFPB, created as a result of the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act, can currently tap up to 12 percent of the central bank’s total operating budget.

Brady’s bill would also:

  • Expand the dozen-member policy-setting Federal Open Market Committee to include the seven regional Federal Reserve Bank governors who are not currently members.
  • Require the Fed to speed up the release of its meeting transcripts, reducing the lag from five to three years.
  • Force the body to formally articulate its tacit lender-of-last-resort policy.
  • Force the Fed to report to Congress on how its policies affect the exchange-rate value of the U.S. dollar.
  • Limit the Fed’s investments to treasuries, with the FOMC reserving the right to temporarily deviate from that requirement with a two-thirds vote.

Bill cosponsors are being recruited. Already signed on are Rep. Scott Garrett, R-N.J., a member of the GOP’s right-most flank, the Republican Study Committee, and Rep. Michael Burgess, R-Texas.

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