WASHINGTON — House Democrats sent a letter to Financial Services Committee Chairman Spencer Bachus on Wednesday, formally requesting a hearing on a bill that would eliminate the Federal Reserve Board's statutory responsibility to focus on employment.
Under a law passed in 1978, the central bank has a so-called dual mandate that requires it to create the conditions for low inflation and high employment. But some Republicans have criticized the dual mandate, arguing the Fed should solely be focused on monetary policy, not employment. Rep. Kevin Brady, R-Texas, is expected to introduce a bill this week that would repeal the dual mandate.
In the letter, Democrats emphasized that they do not support the bill, but said it would be in the public interest to discuss it.
"We believe the question of whether or not the law directing the Federal Reserve to continue to focus equally on inflation and employment should be changed requires a full discussion," the letter says, which was signed by all 27 Democratic members of the Financial Services Committee. "Having a full committee legislative hearing on Rep. Brady's bill with a broad representation of the various viewpoints would, we believe, give people in the country a better sense of whether or not any change of this sort is appropriate."
At a hearing last week involving testimony from Fed Chairman Ben Bernanke, Bachus, R-Ala., raised whether the dual mandate was appropriate.
"By giving the Federal Reserve a mandate that includes maximum employment, it is fair to ask whether we have surrendered too much control over the economy to a government agency and whether that mandate is more centrally focused on monetary policy would be a better appropriate," Bachus said. "It may therefore be appropriate for Congress to revisit the dual mandate with an eye towards refocusing the Fed on its core mission of long-term price stability and other matters that constitute monetary policy."
Immediately afterward, Rep. Barney Frank, the top Democrat on the panel, said he "would particularly welcome this debate on the dual mandate."
"The point is that monetary policy, the level of interest rates, has an effect on employment," Frank said. "The notion that they aren't connected, obviously, isn't the case. The chairman didn't say that, but I think that is the implication of saying that the Federal Reserve shouldn't be dealing with employment."
A spokesman for Bachus was not immediately available for comment.
