At a hearing regarding the US Federal Reserve's Semi-Annual Monetary Policy Report last week, French Hill, Chairman of the House of Representatives Financial Services Committee, criticized the Fed's regulatory and supervisory actions under the Biden administration, arguing that it “took serious liberties with its independence.”
"In law, the Fed Vice Chair for Supervision's role is to 'develop policy recommendations' that are then brought to the Board of Governors for consideration, not to develop partisan proposals without wider input from the Board of Governors and the public," Hill said while addressing Fed Chair Jerome Powell. “In my estimation, over the years, you and the Board have been too deferential to the statutory Vice Chair of Supervision.”
Hill accused Vice Chair for Supervision Michael Barr of using the Fed as a "vehicle for partisan goals" rather than following proper procedures. He claimed Barr was given "free rein" to impose policies without sufficient input, undermining the Fed's neutrality. Hill emphasized the need for the Fed to refocus on its legal mandates. "The Fed has a chance, right now, to get back on the right track," he urged.
In response to a question from Representative Bill Huizenga during that hearing, Powell said that there was less volatility in Fed policy before the Vice Chair for Supervision role was created. "You've got a group of seven people on the board, and as appointments change, there'll be some changes in the approach to regulation," he acknowledged. "Putting it all in a single person, admittedly, just to recommend to the board can lead to some volatility … and that's not great for the institutions we want to regulate. We want to have a good set of regulation that doesn't swing back and forth very much."
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