Senate Banking chief wants a Fed audit

The Alabama Republican has made few public comments about his plans for legislation and oversight since taking over the top spot on the panel. But his comments Thursday suggest that he is open to the kind of bill introduced Wednesday by the libertarian Sen. Rand Paul, R-Ky., to have the Government Accountability Office audit the central bank.

The Fed is already audited by an outside accountant and most of its functions are audited by the GAO. Paul’s bill would also extend that examination to short-term monetary policy decisions and some Fed transactions shielded from the audit.

Shelby did not say that he favored Paul’s bill. Instead, he remarked that he was particularly interested in the Fed’s portfolio of securities. In the wake of several large-scale asset purchase programs intended to spur the economy, the Fed has a roughly $4.5 billion balance sheet, mostly comprising Treasury and mortgage-backed securities.

Federal Reserve Chairwoman Janet Yellen and other members of the central bank have objected to the Fed audit legislation, saying that it would expose monetary policy decisions at the independent agency to short-term political pressures.

Asked whether he intended to “meddle” in Fed affairs, Shelby responded that it depended on how “meddle” is defined. “If you define it loosely, we’re always going to be meddling” by implementing congressional oversight, he said.

“We should make sure that what they do, they’re doing right,” Shelby said of the Fed. He said that he had some problems with Yellen’s management of the Fed, and said that she was a “very lax regulator” during her time as the president of the San Francisco regional Fed bank.

Shelby, who is beginning his second stint as the head of the committee, also weighed in on housing finance and financial regulation.

When it comes to overhauling the bailed-out government-sponsored enterprises Fannie Mae and Freddie Mac, Shelby said, “we will see how far we can go” in developing a bipartisan bill.

“I’m not interested in any bill with explicit guarantees,” Shelby said. A bipartisan bill by the top members of the Banking Committee in the previous Congress included a government guarantee for mortgage-backed securities, with private investors in a first-loss position.

Shelby also identified one clear legislative goal: overhauling the structure of the Consumer Financial Protection Bureau, created by the Dodd-Frank Act to prevent abuses in consumer finance.

Currently the CFPB is run by one director and is funded by the Fed. Shelby wants to institute a board of multiple commissioners, like the ones at the Federal Deposit Insurance Corp. and other independent agencies, and bring funding under Congress’ power.

Consumer advocates oppose such changes, warning that they could limit the CFPB’s ability to act independently to curb scams.