Ron Paul and congressional subcommittee set to scrutinize Fed's monetary policy
A U.S. congressman known for opposing aggressive monetary policies employed by the Federal Reserve is about to get his day in court, so to speak. Rep. Ron Paul, R-Texas, said Friday the Domestic Monetary Policy and Technology House Subcommittee that he chairs will discuss the impact of quantitative easing and what he describes as aggressive Federal Reserve policies on job creation and unemployment. The probe into Fed policy will take place on Feb. 9. Witnesses have yet to be announced. The hearing — Can Monetary Policy Really Create Jobs? — will be the subcommittee's first agenda item in the new Congress. "Despite enormous amounts of monetary and credit expansion by the Federal Reserve in recent years, the nation’s unemployment picture remains bleak," Paul said in a statement Friday. "While many focus on the impact of fiscal policies on employment, the effect of monetary policy often goes unexamined," he added. "In my view we are now experiencing the bust that inevitably results from the misallocation of capital and human resources in a period of artificially cheap credit.” Rep. Paul said the panel will focus on the Fed's preference for quantitative easing. In November, the Federal Reserve announced plans to purchase $600 billion in long-term Treasurys, an initiative that drew criticism from policymakers who feared the measure would create inflationary pressures. Fed Chairman Ben Bernanke staved off criticism Thursday, telling reporters at the National Press Club that expansionary policies are not the cause of higher food prices across the globe, Reuters reported. Richard Fisher, president of the Federal Reserve Bank of Dallas, also told Bloomberg news this week that he is wary of supporting further quantitative easing. It's not the first time Congress has taken aggressive steps to understand the Fed, Roger Meiners, an economist with the University of Texas at Arlington, told HousingWire. "When we had high inflation in the '70s, it resulted in the Fed chairman being pitched out and Paul Volcker being put in," he said. "But, what is unprecedented, is discussion of having a more openness requirement. Since the Fed now has become very active in managing the federal deficit, it sort of holds the keys to the kingdom. So there is good reason to ask why it does what it does in secret." At the same time, Meiners said there's a downside to intense congressional scrutiny of the Fed. "The concern is that the Fed could become more political than it is," Meiners explained. "You want sound money policies based on best judgment, not the political needs of the day. Independent central banks do better than political hacks running the money supply." Write to Kerri Panchuk.