Federal Reserve Official Donates to Clinton Campaign

Photo credit: Kurtis Garbutt via Flickr (CC BY 2.0)

According to Federal Election Commission filings, Lael Brainard, a member of the Federal Reserve’s Board of Governors, contributed $750 to Hillary Clinton’s campaign earlier this cycle.

Bloomberg Politics reports:

While Fed officials sometimes identify with either major political party, donations to a presidential candidate by a senior policy maker are unusual, particularly at a time when the central bank is trying to guard its independence from politics. The Fed’s authority has been criticized during the campaign, and both Democratic and Republican lawmakers have questioned decisions about regulation and monetary policy.

[…]

Senator Richard Shelby, the Alabama Republican who heads the Senate Banking Committee, said Brainard’s contributions “validate” his concerns about allowing a single president to nominate every Fed board member.

“Governor Brainard’s contributions to Hillary Clinton’s campaign call into question the political independence of the board,” he said in an emailed statement from his press office.

There’s some history here. Brainard was an Obama administration appointee to the Treasury before joining the Fed, and her husband was a top adviser to Clinton in the State Department.

And political donations from Fed officials aren’t exactly unprecedented either. Bloomberg notes that Bill Clinton appointee Alice Rivlin “donated $500 in 1998 to the Democratic National Committee, FEC records show.”

Nevertheless, as Brookings Institution senior fellow Sarah Binder points out, the timing of this contribution could be seen as suspicious:

“If there is an issue here, it is one of optics,” Binder said. “It is a question of where governors want to draw their own lines and how they want to be perceived.”

House Republicans are trying to get the Fed to abide by policy rules.

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Rand Paul Likens Fed to Soviet Politburo After Interest Rate Increase

Sen. Rand Paul (R-KY) (photo credit: Gage Skidmore)

On Wednesday, the Federal Reserve announced that it was raising interest rates for the first time in seven years. Surprisingly, longtime critic of zero interest rates Senator Rand Paul skipped the expected sigh of relief, instead expanding his criticism of the Federal Reserve’s role in setting the value of money:

“Is it a good thing or a bad thing to raise the interest rate?” Paul asked. “Well, I’m kind of agnostic on it. It’s kind of like if you ask me: All right, should the Politburo raise the price of bread or lower the price of bread? I like both prices, but the real question should be: Should the government be involved with setting prices? What amazes me about the Federal Reserve setting interest rates is that almost to a person, conservative economists in our country will say, wage and price controls are a mistake.”

The Soviet references seem a little overboard, but it’s good to hear Senator Paul bring up the important question of whether the federal government should be in charge of setting the price of anything, much less the value of the dollar. Rand Paul has been a big advocate in Congress of reform packages like the Centennial Monetary Commission, which passed the House last month as part of the FORM Act. As 2016 heats up, I’m looking forward to Senator Paul continuing to lead a national discussion on the future of U.S. monetary policy.

Nick Arnold is a researcher for the American Principles Project. Continue Reading

Cruz Questions Yellen on Fed Policy

Sen. Ted Cruz (R-TX) (photo credit: Gage Skidmore)

Ralph, you noted this first, but this New York Sun editorial is worth a closer look. In a glowing column Friday, the Sun praised Ted Cruz for his astute questioning of Federal Reserve Chair Janet Yellen in last week’s Joint Economic Committee hearing, and in particular for focusing on the effectiveness of having a monetary rule verses current Fed policy:

The key question Mr. Cruz asked is whether Mrs. Yellen agrees with her predecessor Paul Volcker that the absence of a cooperatively managed rules-based monetary system has not been a great success. Mr. Volcker offered that assessment in a speech to the Bretton Woods Committee in May 2014; it was first reported in a Wall Street Journal op-ed piece by the editor of the Sun and, given Mr. Volcker’s stature, was an important moment in the debate over monetary reform.

Mr. Cruz sketched the economic turmoil since we abandoned the Bretton Woods system for fiat money. He also pressed Mrs. Yellen about a view — of Nobel laureate Robert Mundell, among others — that the central bank’s tightening early in 2008 precipitated the crisis that became the Great Recession. Mrs. Yellen seemed startled, even confused, by the question, at least according to some, and in any event dodged Mr. Cruz’s query with classic Fed-speak.

The editorial also praised the effort in Congress to address U.S. monetary policy shortcomings, particularly the FORM Act and its accompanying Centennial Monetary Commission:

That is the bill that was passed last month by the House and is now before the Senate.

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Game Changer: House Confronts Fed Chair Janet Yellen

Federal Reserve Chair Janet Yellen (photo credit: Day Donaldson via Flickr, CC BY 2.0)

On Thursday, Nov. 19, the Paul Ryan House took its most impressive step yet in advancing Speaker Ryan’s (R-Wis.) promised transformation of our political culture.  Ryan, in accepting the gavel, declared,

“Here’s the problem. They’re working hard. They’re paying a lot. They are trying to do right by their families. And they are going nowhere fast. They never get a raise. They never get a break. But the bills keep piling up—and the taxes and the debt. They are working harder than ever to get ahead. Yet they are falling further behind. And they feel robbed—cheated of their birthright. They are not asking for any favors. They just want a fair chance. And they are losing faith that they will ever get it. …

“What a relief to them it would be if we finally got our act together—what a weight off their shoulders. How reassuring it would be if we actually … grew our economy, … lifted people out of poverty, and paid down the debt. At this point, nothing could be more inspiring than a job well done. Nothing could stir the heart more than real, concrete results.”

Ryan is losing no time in taking bold steps. With the instrumental support of Leader Kevin McCarthy (R-Calif.), leadership brought up for a floor vote — and passed — possibly the most crucial piece of economic growth legislation in many years: Huizenga-Garrett’s FORM, the Federal Reserve Oversight and Modernization Act of 2015.

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House Passes Historic Legislation Exercising Authority Over Federal Reserve

U.S. Capitol Building — East steps

In a historic vote this morning of 241-185, the House of Representatives passed H.R. 3189, the Federal Oversight Reform and Modernization Act.

The FORM Act — very much including Chairman Kevin Brady’s (R-Texas) Centennial Monetary Commission legislation — is the most important legislation to pass the House addressing the Fed’s performance since the Humphrey-Hawkins Act of 1978, almost forty years ago. The passage of this legislation is historic.

The American economy has been stagnant now for 15 years. Many believe that the booms, busts, the panic of 2008, the Great Recession, and the sluggish recovery were caused in major part by bad Federal Reserve monetary policy. Congress should be applauded for exercising its constitutional authority in this area. The Freedom Caucus should give Speaker Ryan a standing ovation.

Ralph Benko, internationally published weekly columnist, co-author of The 21st Century Gold Standard, lead co-editor of the Gerald Malsbary translation from Latin to English of Copernicus’s Essay on Money, is American Principles Project’s Senior Advisor, Economics. Continue Reading

Fed Reform Battle Heats Up in Congress

The Federal Reserve headquarters in Washington, DC (photo credit: Dan Smith, CC BY-SA 2.5)

A new bill seeking to increase oversight on the Federal Reserve and force it to endorse a rule will likely come up in the House this week, kicking the debate over U.S. monetary policy into high gear:

The bill, called the Fed Oversight Reform and Modernization Act — FORM Act for short — deals with a lot of issues relating to the Fed’s management of U.S. monetary policy, but one element of the bill will receive most of the attention and commentary by monetary policy specialists. This is the bill’s requirement that the Fed publish a rule that would, in theory, explain what the Fed would do to achieve the twin goals of low inflation and economic growth. The Fed doesn’t have to follow the rule, but it must explain why it varies from the rule when it is does so.

Unsurprisingly, Federal Reserve Chair Janet Yellen is not happy about the idea.  She wasted no time writing a letter to Speaker Paul Ryan asking him to reject the bill, calling the sections pertaining to monetary policy “particularly troubling”:

“This provision would politicize monetary policy and bring short-term political pressures into the deliberations of the FOMC by putting into place real-time second guessing of policy decisions,” Yellen wrote in the letter. “Such action would undermine the independence of the Federal Reserve and likely lead to an increase in inflation fears and market interest rates, a diminished status of the dollar in global financial markets, and reduced economic and financial stability.”

The FORM Act’s sponsor, Bill Huizenga, disagrees:

“The Fed’s recent high degree of discretion and its lack of transparency in how it conducts monetary policy demonstrate that not only are reforms needed, but more importantly that reforms are necessary. 

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