Republicans at this week’s hearing with Federal Reserve Chair Janet Yellen raised questions about how much influence the executive branch holds over the central bank and argued in favor of accountability reforms to both protect the Fed’s independence in its conduct of monetary policy and to help give the economy greater certainty.
In its coverage of the hearing, the Associated Press reported that Republicans on the committee “challenged the central bank’s lack of accountability”
Members “seized on Ms. Yellen’s official calendar records and an October speech on inequality, just before the midterm elections, as evidence she was leaning towards the Obama administration and Democrats,” reported the Wall Street Journal in its coverage of the hearing.
While Chair Yellen and Democrats argued reforms would open the Fed to political influence, “Republicans at the hearing countered that Ms. Yellen’s calendars show the executive branch has far more access, and potentially more influence, than Congress,” the Journal reported.
“Opponents argue any reforms threaten the Fed’s monetary policy independence, but the greatest threat to that independence comes from the executive branch, not the legislative branch,” said Chairman Jeb Hensarling (R-TX). “While the Federal Reserve Chair testifies publicly before this committee twice a year, she meets weekly with the Treasury Secretary in private. And for decades there has been a revolving door between Treasury officials and Fed officials which continues even today…Fed reforms are needed and I for one believe Fed reforms are coming.”
“The Federal Reserve has proven time and time again that its government knows best approach doesn't hold the cure for what ails the economy," said Monetary Policy and Trade Subcommittee Chairman Bill Huizenga (R-MI). "It's time we restore certainty as well as fiscal responsibility, and we must lift the veil of secrecy to ensure that the Fed is accountable to the people's representatives, the same people that created the Federal Reserve in the first place."
Capital Markets and Government-Sponsored Enterprises Subcommittee Chair Scott Garrett (R-NJ) said, "In theory, having a technocrat like the Fed to simply implement monetary changes based on basic facts, it sounds appealing. But in practice, that is not anywhere close to what happens at the Fed."
The Housing and Insurance Subcommittee held a hearing Thursday on the Federal Housing Administration (FHA), the second in a series that began earlier this month with the full committee’s hearing with HUD Secretary Julian Castro.
“House Republicans have argued that the FHA was wrong to make a cut to its annual mortgage insurance premium before its reserve fund reached a statutory minimum – and witnesses agreed,” reported the American Banker in its coverage of the hearing. Witnesses told the subcommittee that the FHA’s premium reduction “is undercutting the private sector and expanding the government’s role in the housing market.”Subcommittee Chairman Blaine Luetkemeyer (R-MO) said, "The underlying problems at FHA have existed for years and continue to pose a threat to all Americans. If a private business like the ones represented on our panel today operated in a fashion similar to FHA, it would be placed into receivership. Yet FHA continues unapologetically down a dangerous path that we’ve traveled before."
March 3, 2015 2:30 p.m.
Full Committee Hearing
"The Semi-Annual Report of the Bureau of Consumer Financial Protection"
March 5, 2015 9:00 a.m. Capital Markets and Government Sponsored Enterprises Subcommittee Hearing
"Oversight of the SEC’s Division of Enforcement"
CNBC Video | Chairman Hensarling Reacts to Fed Chair’s Testimony
Bloomberg | Rep. Huizenga Calls for More Fed Transparency
CNBC | Are community banks doomed to fail?
Wall Street Journal | Fed’s Yellen Fends Off Charges of Partisan Tilt
American Banker | House GOP Hammers Yellen Over White House Meetings
The Hill | Ex-Im critics pounce after bank yanks data
Wall Street Journal | Fannie, Freddie Weak Earnings Raise Possibility of Future Bailouts
The Hill | GOP bill aims to block financial adviser regs
American Banker | FHA Premium Cut Keeping Private Sector Out of the Market, Industry Claims
Washington Examiner | Fed's already political, GOP argues in oversight pushThe Hill | Ex-Im worker accused in bilking scheme
Financial Services Committee Chairman Jeb Hensarling (R-TX) today announced the committee’s hearing schedule for the week of March 2:
Tuesday, March 3rd at 2:30 P.M.- A full committee hearing to receive the Semi-Annual Report of the Bureau of Consumer Financial Protection from Director Richard Cordray.
The hearing will take place in room HVC-210 of the Capitol Visitor Center.
Thursday, March 5 at 9:00 A.M.- A Capital Markets and Government Sponsored Enterprises Subcommittee hearing to examine the Securities and Exchange Commission’s (SEC) Division of Enforcement. Andrew Ceresney, the SEC’s Director of Enforcement, will testify.
The hearing will take place in room 2167 of the Rayburn House Office Building.
“If independence is an issue, than we really ought to examine the independence of the Fed
from the executive branch of government. That’s where the real threat is,
not from the legislative branch”
You can watch the entire interview by clicking on the image, and below are excerpts that may be of particular interest.
On his reaction to Chair Yellen’s testimony:
“Well, I was disappointed because what we have seen now is that middle income families are still struggling in the slowest, weakest recovery in the postwar era, and yet it seems that we will continue on extraordinary measures that were employed back in 2008 and here we are in 2015. And yet they are not more transparent, they are not more accountable, and the real issue is, economists I know believe that we are best served when the Federal Reserve will communicate to the public what their monetary policy will be, and yet we didn't hear it in this particular testimony.”
On the Federal Reserve’s independence:
“[M]any of us believe that if independence is an issue, than we really ought to examine the independence of the Fed from the executive branch of government. That’s where the real threat is, not from the legislative branch that merely has asked the Fed -- you make up monetary policy, you can waive it, you can change it, but you ought to have an obligation to communicate it to the rest of us, and when you don't, you hinder economic growth, you hinder a healthy economy, you hinder middle income America that now has smaller paychecks and a smaller bank account.”
On making the Fed more transparent and accountable:
“The House Financial Services Committee moved a bill that, again, would simply ask the Fed to reveal its policy -- it's really about transparency and accountability -- just as long as they reported it to the rest of us and to ensure that the Fed, as you know, just doesn't have to do with monetary policy, it has to do with being a prudential banking regulator. And yet they are exempt from any of the provisions like cost-benefit analysis that other prudential regulators are required to do. We moved that bill in the last Congress. I intend to move a similar bill in this Congress.”Read More
|CLICK HERE TO WATCH
Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered the following opening statement at today’s full committee hearing with Federal Reserve Chair Janet Yellen:
As Chair Yellen delivers her semi-annual report today, we have an opportunity to examine the state of the Fed’s balance sheet. But it is the “Precarious State of Family Balance Sheets” that must be foremost on our minds. That, coincidentally, is the title of a recent report by the Pew Charitable Trusts which rightly concludes that “many American families…are walking a financial tightrope.”
Since the president embarked on his economic program, middle income families have found themselves with smaller paychecks, smaller bank accounts and farther from financial independence. Millions have become so discouraged trying to find a job they have simply given up and left the work force.
Although we have happily seen some recent improvement in our economy, Americans are still mired in the slowest, weakest recovery of the postwar era – this in spite of the single-largest monetary stimulus in America’s history.
Why is this recovery so anemic? No doubt Obamacare, Dodd-Frank and the other roughly $617 billion in new regulatory costs imposed by the administration. This is something monetary policy cannot remedy.
On top of this is the burden of $1.7 trillion in new taxes that fall principally upon our engines of job growth: small businesses, entrepreneurs and investors. Monetary policy cannot remedy this, either.
Then there’s the doubt, uncertainty and regulatory burden that grows as more and more unbridled, discretionary authority is given to unaccountable government agencies. Although monetary policy cannot remedy this, it can help.
During the most successful periods of our Fed’s history, the central bank appeared to follow a clear rule, methodology or monetary policy convention. Today, however, it favors a more unpredictable and somewhat amorphous forward guidance – which creates uncertainty.
For example, just moments after the FOMC released its policy statement on December 17, the Dow surged over 300 points -- seemingly based upon nothing more than the substitution of the word “patient” for the phrase “considerable time.” And when Chair Yellen’s predecessor once publicly mused about the mere possibility of tapering Quantitative Easing, markets took a deep dive.
Thus, there does not appear to be all that much guidance in the Fed’s forward guidance. As one former Fed president recently wrote: “Monetary policy uncertainty creates inefficiency in the capital market. The FOMC gives lip service to policy predictability but its statements are vague…The FOMC preaches that policy is data dependent but will not tell us what data and how.”
Many prominent economists believe the American people will enjoy a healthier economy when the Fed begins to adopt a more predictable method or rules-based monetary policy- one of its choosing.
Opponents argue any reforms threaten the Fed’s monetary policy independence, but the greatest threat to that independence comes from the executive branch, not the legislative branch. While the Federal Reserve Chair testifies publicly before this committee twice a year, she meets weekly with the Treasury Secretary in private. And for decades there has been a revolving door between Treasury officials and Fed officials which continues even today.
With respect to reform, accountability and transparency on the one hand, and independence in the conduct of monetary policy on the other, these are not mutually exclusive concepts.
After Dodd-Frank, a quadrupled balance sheet, massive bailouts and unprecedented credit market interventions, the financing and facilitation of trillions of dollars of new national debt this is clearly a very different Fed.
Chair Yellen, I will listen very carefully to constructive suggestions that improve Fed reform ideas, but I for one believe Fed reforms are needed and I for one believe Fed reforms are coming.Read More
The panel discussion, titled “Friends in Low Places: How Cronyism Corrupts Free Markets,” will focus on pro-growth, pro-Main Street economic principles instead of subsidies from the crony-connected Washington economy.
In his remarks, Hensarling will discuss the U.S. Export-Import Bank’s upcoming reauthorization.
“There is probably no better poster child of the Washington insider economy and corporate welfare than the Export-Import Bank. Its demise would be a resounding victory for the Main Street competitive economy. I believe it is a defining issue for our party and our movement,” said Rep. Hensarling.
“Ex-Im doesn’t level the playing field; Ex-Im rigs it in favor of a few powerful Fortune 500 corporations that are the overwhelming beneficiaries of this program. Washington shouldn’t pick winners and losers, and hardworking American taxpayers – who are already under tremendous stress – shouldn’t be forced to pay for foreign corporate welfare that advantages a handful of very successful and powerful politically-connected corporations,” Rep. Hensarling added.
Details on the discussion panel are as follows:
WHO: Rep. Jeb Hensarling (R-TX), Chairman of the House Financial Services Committee, and other participants.
WHAT: CPAC panel discussion “Friends in Low Places: How Cronyism Corrupts Free Markets.”
WHEN: Friday, February 27th at 2:10 P.M.
WHERE: Gaylord National Resort & Convention Center, Potomac 4
Additional information can be found at http://cpac.conservative.org/
Wednesday, February 25 at 10:00 AM - A full committee hearing to receive the semi-annual report on Monetary Policy and State of the Economy from Federal Reserve Chair Janet Yellen.
The hearing will take place in room HVC-210 of the Capitol Visitor Center.
Thursday, February 26 at 10:00 AM - A Housing and Insurance Subcommittee hearing to examine the financial health of the Federal Housing Administration, the second in a series of hearings that began with HUD Secretary Castro’s appearance last week.
The hearing will take place in room 2220 of the Rayburn House Office Building.
The committee held a hearing on Wednesday to examine the fiscal health of the Federal Housing Administration (FHA) and heard testimony from Housing and Urban Development Secretary Julian Castro.
"We all recall the famous admonition from Spanish philosopher Santayana who said, 'Those who do not remember the past are condemned to repeat it.' History has taught us that the root cause of the financial crisis was not deregulation but dumb regulation and helping put people into homes they could not afford to keep. Now the FHA, with exceedingly low down payments and a recently announced approximately 40 percent cut in its premiums, appears to be doing that. All at a time where the FHA continues to violate federal law by keeping a woefully insufficient capital reserve and right after receiving its first ever taxpayer bailout,” remarked Chairman Jeb Hensarling (R-TX).
In its coverage of the hearing, the Wall Street Journal noted that since 2009 the FHA has been in violation of the law which requires the agency to have a capital buffer equal to at least two percent of the loans it guarantees. While Secretary Castro told the committee the premium cuts would push back the FHA’s return to the two percent threshold by only “a few months,” the Journal reported that Moody’s Analytics Chief Economist Mark Zandi and others have said “the fund might not return to the two percent level until 2018, two years later than an estimate made by the FHA’s independent actuary in November.”
After questioning from Rep. Sean Duffy (R-WI), “Castro acknowledged that the 50-basis-point reduction in fees would slow full restoration of the fund," noted the American Banker. "Duffy said it was proof of Republican arguments."“Republicans cite the FHA’s need for a $1.7 billion draw from the Treasury in 2013 to shore up its reserve fund as reason to be concerned about the agency’s failure to move faster toward the two percent level,” The Hill reported in its coverage of the hearing.
Coming to your inbox on Sunday afternoon in this week’s Video Message: Rep. Andy Barr (R-KY) will discuss why hardworking taxpayers should be concerned the FHA is putting them and homebuyers at risk.Committee Holds Markup of Views and Estimates
Wall Street Journal | HUD Secretary Defends Decision to Lower FHA Fees
American Banker | Republicans Hammer Castro Over FHA Premium Reduction
Financial Times | Regulations hit smaller US banks hardest
El Paso Inc. | Community banks lobby for relief
Investor's Business Daily | Economic Optimism Index Dives Among Middle Class: Poll
Investor's Business Daily | Studies Confirm Dodd-Frank Strangling Small Lenders
Real Clear Politics | The Truth About Obama's Job Record
Bloomberg | Financial regulators should embrace cost-benefit analysis
American Banker: Republicans Hammer Castro Over FHA Premium Reduction
"Don't you care about those people? Are you so inclined to write more loans that you are just trying to entice them for $20 or $30 to get into a house that they can't afford?"
"This is what brought us to this crisis in the first place and you are going down the exact same road."
- Subcommittee Chairman Scott Garrett (R-NJ)
Housing Wire: HUD's Castro grilled on FHA premiums, capital strength
“HUD is not in compliance with the law, and you should do everything you can to get there more quickly.”
- Subcommittee Chairman Sean Duffy (R-WI)
Reuters: U.S. housing secretary defends reduction in mortgage insurance fees
"We've had this whispered into our ear before it hasn't proven true, and again you are in violation of the law that is there to protect taxpayers and home owners and that has got to stop."
- Chairman Jeb Hensarling (R-TX)
MReport: HUD Chief Faces Questions on FHA’s Financial Position
"If a private company operated the way FHA operates, it would be shut down."
"Much of the capital FHA does hold has come from a taxpayer bailout and Justice Department settlements. I fear that has created a false sense of security surrounding the fiscal health of the agency. In spite of all this, the agency has decided to lower mortgage insurance premiums. This policy change squeezes what could be a more robust private industry out of the market and increase taxpayer exposure."
- Subcommittee Chairman Blaine Luetkemeyer (R-MO)
The Hill: Castro grilled over lowering mortgage insurance premiums
"It seems you should be looking more toward getting the reserves up."
- Rep. Ed Royce (R-CA)
Wall Street Journal: HUD Secretary Defends Decision to Lower FHA Fees
“After all these years, at what point does HUD and the FHA intend to follow the law?”
- Chairman Jeb Hensarling (R-TX)
|CLICK HERE TO WATCH
Those who are not freshmen know that we run the debt clock in the proceedings of this committee. I fear too often it is something certain Members lose sight of; we shouldn’t. There is no family, no small business and certainly no great republic that can continue to spend money they don’t have. There are some who wish to ignore the clock and there are some who make light of the issue. I have no doubt that the governing authorities in Greece and places like Detroit also ignored the mounting debt and at some point the day of reckoning occurs. When it does, people suffer- particularly those on the lower income scale.
This committee should not ignore the perilous state that we find ourselves in; more debt created in the last six years than in our nation’s first two hundred. My laptop on my desk is awash of reports from the CBO, the GAO, the OMB not to mention respected economists and the Federal Reserve. All have come to the same conclusion that our debt is totally unsustainable. And yet, regrettably, we have the president who is submitting a budget that adds another $8½ trillion to our national debt. Now just four years ago the president said “[A]ll this rising debt will cost us jobs and damage our economy.” I wish that his actions followed his words. Apparently they do not.
That particular debt you see on the clock today represents roughly $160,000 of debt for every American household. That comes out of their American dream. That is funds that cannot be used to send kids to college. Those are funds that can no longer be used to pay for health care premiums that have risen. They are funds that cannot be used to capitalize a new small business so that again they can achieve their American dream.
So with the various programs and agencies within our jurisdiction we must do better. This debt, again I agree with the President in this case, it will damage our economy and it will cost us jobs. Regrettably, although our economy is certainly better today than it was perhaps a year ago, we still find ourselves in the midst of the slowest, weakest economic recovery in the post-war era. We still have millions and millions who are either unemployed or underemployed. Although the unemployment rate has come down, a major factor in that is the number of people who have simply left the labor force because they have given up. So the ratio may come down, but it belies the angst, the anxiety, the suffering of many low and middle-income Americans today.
We can do better and we must do better by those who are trying to get ahead. The best way to do that is to build a healthy economy and to build it from Main Street up, not Washington down. We have tried that. We have tried that for six years and it has failed.
The Budget Views and Estimates that have been put together today will help this committee and help the Budget Committee guide our proceedings to ensure that we can help low and middle-income Americans in their pursuit of happiness and that we can ensure that we do not leave a legacy of debt for our children and our grandchildren and betray the American dream; which is not the fancy new car, it is not the new home with the kitchen and the granite countertops. The American dream is ensuring that our children and grandchildren have greater opportunities, greater freedom and a higher standard of living than we have enjoyed.Read More
2129 Rayburn HOB
Washington, DC 20515