Federal Reserve Vice Chairman Stanley Fischer warned Congress that it was in danger of infringing on the central bank’s independence with several new legislative efforts, specifically referring to pending bills meant to audit the Fed and a highway bill that would be partially funded by taking savings from the central bank.
Speaking at the Canadian embassy in Washington, Fischer criticized the audit the Fed legislation backed most prominently by presidential candidate Sen. Rand Paul, R-Ky.
Paul’s Fed audit, and separate legislation backed by Republicans on the House Financial Services Committee, would “reflect an effort by the Congress to influence the Fed’s policy decisions,” Fischer warned. He did not mention Paul or any other lawmakers by name.
In text prepared for the speech, Fischer said the bills would subject the Fed “to the very sort of political pressure from which experience suggests central banks should be independent.”
Fischer also criticized a separate effort by Congress to cut the dividend paid by the Fed to its member banks and to use the savings to pay for new highway spending.
He said that “using a central bank as a source of revenue to cover the cost of a fiscal program is dangerous to its independence.”
The measure “amounts to quasi-fiscal policy, with manifold implications for central bank independence as well as for the quality of fiscal policy decisions,” Fischer argued.
The highway funding legislation would lower the dividend paid to member banks above a certain size from 6 percent to 1.5 percent, raising $16 billion for three years of spending.
