Republican Leaders Pressure Bernanke On Federal Reserve Policy

Posted on September 21, 2011. Filed under: Uncategorized | Tags: , , , , |

By Caren Z. Turner

As Republicans on the Hill continue to resist the President’s American Jobs Act and sharply criticize his recent debt reduction plan as “class warfare,” their continued pushback against the President on the economy and jobs took an unprecedented step when they sent a letter to Federal Reserve Chairman Ben Bernanke expressing “serious concerns” about the Fed’s role in the U.S. economy.

“Respectfully, we submit that the board should resist further extraordinary interventions in the U.S. economy, particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action and quantifiable benefits to the American people,’ read the letter, which was co-signed by House Speaker John Boehner (R-OH), House Majority Leader Eric Cantor (R-VA), Senate Minority Leader Mitch McConnell (R-KY) and Senate Minority Whip Jon Kyl (R-AZ).

The letter was sent on Monday, just ahead of the Federal Open Market Committee’s (FOMC) two-day meeting which this afternoon will culminate in an announcement of monetary decisions the committee may have made.

Earlier this year the Fed used $600 billion in electronically generated funds to purchase U.S. Treasury bonds from banks in an effort to stimulate the economy. In a similar move, the Fed exercised what is known as quantitative easing by buying $1.5 trillion of mortgage-backed securities.

GOP lawmakers used the letter to warn that other similar activities by the fed “could exacerbate current problems or further harm the U.S. economy.”

“Such steps may erode the already-weakened U.S. dollar or promote more borrowing by overleveraged consumers,” Republican leaders said in the letter. “To date, we have seen no evidence that further monetary stimulus will create jobs or provide a sustainable path towards economic recovery.”

Democratic Senators are angered at what is being seen as a brash and unprecedented political maneuver to influence the politically independent Fed.

“[W]ith this letter to the Federal Reserve, the Republican congressional leaders are telling the Federal Reserve, we believe for the first time in history, that they should not provide in this economy a vehicle for expansion by lowering interest rates,” said Senator Dick Durbin (D-IL). “That to me is wrong-headed.”

Durbin quoted a former Federal Reserve official who said the political communication is “outrageous” that the Fed would receive “direct political communications from Republican leaders.”

Senator Chuck Schumer (D-NY) joined Durbin, criticizing the letter as an inappropriate effort to intimidate the Fed.

“This is a heavy-handed attempt to meddle in the Fed’s independent stewardship of monetary policy,” Schumer said in a statement. “It should be ignored by Chairman Bernanke and the Fed’s policymakers.”

The letter follows a recent string of strong criticism of Bernanke by Republican presidential candidates, some of whom have said they would immediately fire Bernanke if they were to take office, among them Texas Governor Rick Perry, former Massachusetts Governor Mitt Romney, and former House Speaker Newt Gingrich. Rick Perry has gone so far as to say that another round of quantitative easing at the height of political season could be “treasonous.”

Turner GPA is one of the premier, highly respected government and public affairs firms in the nation. Turner’s state-of-the-art advocacy has earned them respect and acclaim from the media, clients, policymakers and even their competitors! Turner advocates on behalf of cutting edge businesses, municipalities, and non-profits that wish to ensure their perspectives and needs are taken into account in Washington, in state capitols and in City Hall, as well as in the media. The firm creates and implements intensely focused and targeted advocacy campaigns designed to meet and exceed its client’s expectations and goals. For more information on Turner GPA, visit www.turnergpa.com or call 202-466-2511.

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