LegiStorm

Summary:

The Federal Reserve (Fed) is the subject of legislation being considered in the 114th Congress. These bills contain wide-ranging provisions that can be grouped into four broad categories: Changes to Fed governance. Some proposals would change the Fed's institutional structure. H.R. 22 (P.L. 114-94) reduced the dividend paid by the Fed to large commercial banks that hold stock in the Fed and permanently capped the Fed's surplus at $10 billion. H.R. 3189 would permanently eliminate the Fed's surplus. H.R. 26 (P.L. 114-1) changed and H.R. 3189 would change the qualifications for selecting individuals to the Fed's board of governors and regional bank boards, respectively. H.R. 3189 and S. 1484/S. 1910 would make the Federal Open Market Committee (FOMC) responsible for setting the interest rate paid on bank reserves and provide each Fed governor with their own staff. S. 1484/S. 1910 would make the New York Fed President a presidentially appointed position. H.R. 3189 would change the voting privileges of FOMC members. S. 1484/S. 1910, H.R. 3189, and H.R. 2912 would create a congressional commission to recommend reforms. Changes to oversight and disclosure. Some proposals aim to make the Fed more accountable to Congress by increasing congressional oversight or requiring the Fed to disclose more information to Congress and the public. H.R. 24 and S. 2232 would require a one-time Government Accountability Office (GAO) audit of the Fed that is not subject to statutory restrictions. H.R. 3189 would require GAO to audit the Fed annually without statutory restrictions; subject the Fed's rulemakings to cost-benefit analysis requirements; create a blackout period surrounding FOMC meetings; and require the Fed to publicly disclose the salaries of certain officials and employees and more information on stress tests, supervisory letters, and international negotiations. H.R. 3189 and S. 1484/S. 1910 would require the Fed to report quarterly on monetary policy, require the FOMC to publicly release transcripts, and require the chair to testify semiannually on regulation when the vice chair for supervision position is vacant. S. 1484/S. 1910 would require the chair to testify quarterly on monetary policy, allow other members of the FOMC to submit dissenting opinions to Congress, require the governors to take a recorded vote on larger enforcement actions, and require the Fed to report on and GAO to conduct a study on the Fed's regulation of large financial firms. Changes involving the Taylor Rule. H.R. 3189 and S. 1484/S. 1910 would require the Fed to compare its monetary policy decisions to those prescribed by a Taylor Rule and report those findings to Congress. Policy deviations from the rule would trigger GAO audits and congressional testimony in H.R. 3189. Changes to the Fed's emergency lending powers. H.R. 3189 would reduce the Fed's discretion to make emergency loans under Section 13(3) of the Federal Reserve Act. The Fed used this authority to make loans to non-bank financial firms during the financial crisis. The various proposals reviewed in this report are wide ranging and diverse; many are united by the goals of increasing the Fed's accountability to Congress and decreasing Fed discretion. Although some provisions make very minor changes, taken together the proposals would arguably somewhat reduce the Fed's independence from Congress. The Fed is more independent than most other agencies, which has traditionally been justified by its monetary policy responsibilities. To some extent, a tradeoff between independence and accountability is unavoidable. This report analyzes these provisions and the policy debate surrounding them. It covers bills that have seen committee or floor action.