Why the Fed is Under New Scrutiny

The Marriner S. Eccles Federal Reserve Board Building – Washington, DC

The Hill reports:

The Federal Reserve is pushing back against mounting criticism of the central bank, as those pushing for reforms ratchet up their attacks. . . The uptick in outreach from the independent agency signals an effort to quell calls for significant changes at the Fed and assuage concerns that it has become too opaque and too cozy with Wall Street.

Even some independent observers are puzzled by the highly visible push back from the Fed:

“It almost seems like they’re running scared,” said Vern McKinley, an attorney who advises governments on central banking policies. “It’s beneath them to be doing this lobbying.”

McKinley, who has done work with the Fed and the Treasury Department, called the Fed’s political outreach efforts “surprising” and “unseemly.”

The Hill pointed out one reason for new energy behind the Audit the Fed campaign is that the 2010 Dodd-Frank reform law handed the banks new regulatory power over financial institutions. This mission creep opens up the Fed to normal political give-and-take, like other regulators:

“As Fed officials get deeper into the regulatory space, we are now starting to see them acting more like regulators,” [one] industry source said. “[They’re] commenting on issues of concern beyond interest rates — that’s new.”

[…]

“Clearly the Federal Reserve fears the information that may be disclosed as part of an audit,” Paul spokesman Brian Darling said. “Maybe they fear that the revolving door between the Wall Street and the Federal Reserve will be exposed.

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