In an orchestrated orgy of protests, Fed governors and regional bank presidents have roasted Sen. Rand Paul and his co-sponsors for reintroducing a bill mandating an audit of the Fed. Loretta Mester, president of the Cleveland Fed, wants us to know that such a thought is “misguided.” Why? “They really are about allowing political considerations to influence monetary policy decisions,” she said in a speech in Columbus. “This would be a tremendous mistake, because it would ultimately lead to poorer economic performance.”
What performance? Presumably the Fed wants a pat on the back for the zero-interest-rate policy of the last six-plus years, which has all but abolished bank savings accounts and made it harder for small businesses to access the lines of credit they need to expand—and create new jobs. Or is Ms. Mester talking about the recovery that began in 2009, which is the weakest since the statistics that measure such things began to be kept?
Of course this is about much more than a congressional audit. It is at root the Fed’s desire for zero review and zero debate of a monetary policy that has virtually nationalized lending and seems capable of making stagnation a permanent feature of an economy that not long ago was the most dynamic in the world. God forbid that there should be a political debate about a Fed whose last two chairs are among the most political ever to serve.
And God forbid that Congress should take seriously Article I, Section 8 of the U. S. Constitution, which requires Congress to “coin Money…and regulate the Value thereof.” There is no mention of delegating all monetary policy to the Fed. Indeed, there is no mention anywhere in the Constitution or even its amendments of the Fed itself.
So Ms. Yellen and Ms. Mester, welcome to American politics. If this were a great recovery or even an average one, you might be able to keep getting away with no public scrutiny and no political debate. But everyone knows this recovery and this economy are far below average, and your time of avoiding all accountability is coming to an end.