In a letter to House Speaker Paul Ryan and Democratic Leader Nancy Pelosi Tuesday, Federal Reserve Chair Janet Yellen said the legislation would harm the economy, according to a Bloomberg report.
“The bill would severely impair the Federal Reserve’s ability to carry out its congressional mandate and would be a grave mistake, detrimental to the economy and the American people,” Yellen wrote. Her letter was backed up by the White House, which has threatened to veto the legislation should it cross the president’s desk.
The bill “would effectively put Congress and the GAO squarely in the role of reviewing short-run monetary policy decisions and in a position to, in real time, influence the monetary policy deliberations leading to those decisions,” Yellen wrote.
Lawmakers on both sides of the aisle have criticized the Federal Reserve for a lack of accountability and for bowing to Wall Street influence. The proposed legislation, called the Fed Oversight Reform and Modernization Act, would require the central bank to establish a formula to dictate how it adjusts monetary policy. The act would also give the Government Accountability Office the authority to determine whether the adopted formula met the legislation’s criteria, Bloomberg reported.
But the legislation faces a tough road. Even if the bill passes the House, Senate Republicans will need to court Democratic votes in order for it to succeed there. And the White House has said that it “strongly opposed” the bill, and that President Obama’s senior advisers would recommend a veto if it reached his desk.
The Federal Reserve and the White House have both reiterated their opposition to legislation that would increase congressional oversight of the central bank.