The Fed Oversight Reform and Modernization Act would "severely impair" the central bank's ability to meet it Congressional mandates and "severely damage" the economy, should it be enacted, Federal Reserve Board Chair Janet Yellen wrote in a letter to Congress.
While they are many issues with the act, Yellen wrote "the provisions concerning the conduct of monetary policy are especially troubling." Specifically, she noted the act would require use of a mathematical formula or rule to determine monetary policy.
She called the provisions "significantly flawed." Among her concerns there is no consensus about a rule to cover different scenarios.
Rules would lead to "poor economic outcomes."
Emergency lending capabilities, which would be limited by the Act, also remain a cause of concern.
