Top Republican attacks Fed as central bank mulls policy

Reuters News
Posted: Sep 13, 2012 11:18 AM
Top Republican attacks Fed as central bank mulls policy

WASHINGTON (Reuters) - A senior House Republican slammed the Federal Reserve on Thursday for "radical and unprecedented" policies, marking the latest attack on Fed Chairman Ben Bernanke as the U.S. central bank met to weigh further action to spur U.S. growth.

Bernanke has become a lightning rod for election-year Republican complaints that central bank bond purchases have enabled a massive government expansion by Democratic President Barack Obama, and have overstepped the Fed's authority.

That criticism will harden if its decision on Thursday is seen as helping the economy and lowering unemployment - dominant factors for voters in the race for the White House - thereby improving Obama's chances of prevailing in the November 6 ballot.

Congressman Scott Garrett, who chairs a powerful House financial services subcommittee, said the central bank was deep into "fiscal-type" waters and that future Fed chiefs should be limited to a single term in office.

Republican White House hopeful Mitt Romney has already said that if he won the election, he would not reappoint Bernanke when the chairman's four-year term expires in January, 2014.

The U.S. central bank's policy-setting Federal Open Market Committee will announce its decision at about 12:30 p.m. (1630 GMT) at the close of the two-day meeting.

Many analysts expect it will announce a third round of so-called quantitative easing, on top of the $2.3 trillion of Treasury and mortgage-backed bonds that it has already bought, and commit to keep interest rates near zero until into 2015.

Garrett's criticism comes after calls for a congressional audit of monetary policy, viewed by the central bank as a threat to its independence, amid moves by the Republican-controlled House of Representatives for wider changes at the Fed.

"The Fed is taking such extreme steps that Congress and the American people are saying please stop! There are huge potential risks that are being created by these actions," he said.

Garrett, who chairs the House Subcommittee on Capital Markets and Government-Sponsored Enterprises, made his remarks in a speech to be delivered later on Thursday at an American banker symposium on banking regulation in Arlington, Virginia.

"The Fed and their defenders claim that their independence is being eroded by others' actions, but I claim the exact opposite. I believe the Fed's own actions are eroding its independence," he said in a prepared text of his remarks.

(Reporting By Alister Bull; Editing by Kenneth Barry)