House Passes Huizenga Legislation to Reform the Federal Reserve
Today, Monetary Policy and Trade Subcommittee Chairman Bill Huizenga (MI-02) released the following statement after the House of Representatives passed the FORM Act, legislation he authored to reform the Federal Reserve by restoring accountability, increasing transparency, and strengthening our nation’s monetary policy. The FORM Act passed the House by a vote of 241 – 185.
“By passing the FORM Act, the House has taken a strong step forward in restoring accountability and transparency at the Federal Reserve,” said Congressman Huizenga. “The FORM Act provides the Fed with the flexibility necessary to conduct monetary policy but holds the Fed accountable by requiring it to communicate its policy to Congress and the American people.”
Last night, Congressman Huizenga discussed in detail the importance of the FORM Act and how it strikes the appropriate balance between holding the Fed accountable while still affording it independence to make monetary decisions.
The FORM Act makes two fundamental changes to improve how the Federal Reserve conducts monetary policy. First, it protects the Fed’s ability to develop the best course of action on monetary policy, but requires it to give the American people a greater accounting of its actions. My bill directs the Federal Reserve to transparently communicate its monetary policy decisions to the American taxpayers. By requiring the Fed to regularly communicate how its policy choices compare to a benchmark rule instead of continuing the ad-hoc strategy currently being employed, the FORM Act will help consumers and investors make better decisions in the present and create more sound expectations about the future. Even Chair Yellen once championed the merits of this approach, stating that ‘the framework of a Taylor-type rule could help the Federal Reserve communicate to the public the rationale behind policy moves.’ The FORM Act does not dictate any particular monetary policy course; it simply ensures that the Fed transparently communicates monetary policy.
Secondly, the FORM Act reforms the Federal Reserve’s emergency lending powers under Section 13(3) of the Federal Reserve Act, closing a glaring loophole and preventing future bailouts. During the last financial crisis, the Fed used extraordinarily broad powers to provide trillions of dollars in low-cost loans to a handful of massive financial institutions. The FORM Act raises the bar from the current trigger, permitting the Fed to invoke its emergency lending powers only upon a finding that ‘unusual and exigent circumstances exist that pose a threat to the financial stability of the United States.’ Responsibly limiting the Federal Reserve's lending authority has support from across the ideological spectrum ranging from conservatives to liberals such as Senator Elizabeth Warren.
To watch Congressman Huizenga’s floor speech click here.
Additional background on the FORM Act: