NEW YORK – Auditing monetary policy decisions, as currently proposed, “could diminish the independence of the Fed,” Federal Reserve Bank of St. Louis President James Bullard said today.
Currently, the Fed is “extensively audited,” Bullard said. The proposals on the board to audit policy decision would erode the Fed’s independence, and “could result in a 1970s-style period of volatility. The consequences for the U.S. and the global economy would be large. No one would be served well by this outcome,” Bullard told the Century Club at Washington University, according to text of his remarks, which were released by the Fed.
Financial regulatory reform should not strip the Fed of its supervisory role, Bullard said. “The Fed should continue to supervise state member banks and bank holding companies of all sizes. Understanding the entire financial landscape helps the Fed make sound monetary policy decisions.”
The Fed’s regional structure was designed to allow for input on policy questions from around the U.S. “It is important that the Fed remain connected with Main Street America, and not become biased toward the very large, mostly New York-based institutions,” he said.
As for the economy, Bullard said, “There are continued signs of recovery.” But, he noted, risk remains from the fallout from potential sovereign debt default as conditions continue to deteriorate in Greece and other countries.
