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House Republican’s Proposal Takes Aim at Fed Powers
Rep. Bill Huizenga unveils draft of bill that would alter how central bank conducts monetary policy
The Wall Street Journal - Pedro Nicolaci Da Costa, July 21, 2015 12:53 p.m. ET

A House Republican has unveiled another legislative proposal to curb the Federal Reserve’s powers, the latest in a spate from lawmakers on both sides of the aisle.

Rep. Bill Huizenga (R., Mich.) has posted his draft of a bill that would alter how the Fed conducts both monetary policy and financial regulation.

The legislation would force the central bank to adopt an explicit policy rule—that is, a mathematical formula to determine the level for short-term interest rates based on numerous economic variables—and would require the Fed to disclose more details about its bank stress tests.

The bill also would change the manner in which the Fed is audited to allow the Government Accountability Office to review the central bank’s interest-rate policy at the request of “the appropriate congressional committee.” Currently, the Fed’s financial statements are fully audited by its inspector general and an outside accounting firm, but its monetary-policy decisions aren’t subject to GAO scrutiny.

Fed officials, including Chairwoman Janet Yellen, have expressed opposition to the idea of being forced to adopt a policy rule and having their decisions audited by the GAO. Fed officials worry that GAO audits could be used to exert political pressure on them, raising questions about their independence: Lawmakers who support the audits say they would improve Fed transparency and accountability.

The central bank didn’t respond immediately to a request for comment on the bill.