Barney Frank has submitted legislation that will remove the five of the 12 members of the Federal Open Market Committee from the decision process to set interest rates. His rational is to make this decision “more democratic” by consolidating the voting into the members appointed by the president and confirmed by the Senate.
Since the House is not involved in this process, what is Mr. Frank’s true motive:
The Congressman said this would make the Fed more democratic and increase “transparency and accountability on the FOMC” by eliminating those officials that are effectively picked by the private sector.
But analysts said this could hurt the Fed’s independence from Congress in setting rates. Dan Greenhaus, analyst at Miller Tabak & Co., said the move is “one step closer to having monetary policy dictated by the Congress.”
It is ironic that he wants to introduce “democracy” into the process by removing the members that are not appointed by government.
U.S. Rep. Barney Frank wants to make the Federal Reserve’s process for setting interest rates “more democratic.”The Newton Democrat has filed a bill that would remove the five rotating members of the Federal Open Market Committee who are effectively picked by private financial institutions, according to an announcement today.
Frank, the ranking Democrat on the House Financial Services Committee, said the members are chosen “without input or oversight” by any publicly elected entity. He said his legislation “increases transparency and accountability” on the FOMC.
“These men and women are chosen by a self-perpetuating group of private citizens who disproportionally represent the private financial services industry,” Frank said in a statement. “Although it is useful to have the advice of the representatives of private interests, they should not vote on this extremely important issue of public policy.”