After spending a lifetime in the profession of economics and nearly a decade in the Federal Reserve system, Janet Yellen is now poised to become the first female chair of the Fed in its 100-year-history when the Senate votes on her confirmation later this week. But not if Senator Rand Paul (R-KY) has anything to do with it. Paul may no longer be able to block Yellen’s nomination, but he can run out the 30 hour clock on it. And that’s exactly what he’s threatening to do.
What Paul wants in exchange for a smooth confirmation of Yellen is for Senator Harry Reid (D-NV) to put his ‘Audit the Fed’ bill on the floor for a vote – something Reid has repeatedly refused to do.
“We’ll try to slow it down or stop it as much as we can,” Paul told reporters of Yellen’s nomination. “We will allow it to move forward and expedite it if they give us a vote on Audit the Fed.”
Paul’s call for transparency is understandable, given his repeated insistence on government transparency and his general predaliction towards ideological purity. But auditing the Federal Reserve is much more complicated.
The Fed is already pretty transparent: it is currently subject to a number of independent audits and the chair of the Fed is required to give testimony before Congress at least twice a year. But when it comes to monetary policy, the Fed is not regulated. That’s what Rand Paul wants to change.
Under Paul’s proposal, the Fed would have to defend its every move before Congress and the American people. This sounds nice and transparent, but critics say it would actually undermine the independent nature of the Fed and subject it to needless political pressure – a move that would likely rattle the financial markets and lead to higher borrowing costs.
In June, a similar bill passed in the House with bipartisan support, but it’s unlikely that Senator Paul’s threats will be enough to persuade Reid to bring it to the floor for a vote.