The Federal Reserve Transparency Act is up for a vote in Congress Tuesday. It’s commonly called the “Audit the Fed” legislation, but that’s a misnomer says former Fed Chairman Ben Bernanke. Bernanke is among the most respected money men in the world, having worked as Fed Chair under the last two administrations — Bush and Obama, which otherwise don’t find much high-level staffing in common. Bernanke is among many critics who point out that the so-called “Audit the Fed” act wouldn’t do anything to actually audit the Fed. That job is already being done, very publicly. The Fed is audited regularly by an inspector general and an outside accounting firm, with results posted online. (And there vast additional oversight granted Congress to compel the Fed to achieve results.)
In an article for the Brookings Institution, Bernanke points out that what the “Audit the Fed” act actually proposes is to allow Congress a more transparent window to eavesdrop on (and influence) Fed policy meetings. In effect the “Audit the Fed” would give Congress a real-time seat at the Fed table as it communicates internally and charts its future course. Congress currently must wait until Fed policy is presented — and remains on the outside as internal debates happen. Fed monetary policy decisions — Bernanke contends citing evidence — are best made free of immediate political concerns that Congress necessarily prioritizes. It should function exactly unlike direct democracy, which often fails to adequately consider long-term effects because of the political pressures of the present. For more about how the Fed best functions and its strategies, read Bernanke’s The Courage to Act: A Memoir of a Crisis and Its Aftermath.