A seminar held on March 13 at the Hoover Institution at Stanford University delved into the challenges faced by Congress in maintaining oversight of the Federal Reserve, given the expanding scope and increasing complexity of monetary policy. The discussion was anchored around a working paper from the Hoover Institution titled "Central Bank Undersight: Assessing the Fed’s Accountability to Congress."
According to the Hoover Institution website, during this seminar, Andrew Levin, professor of economics at Dartmouth College, and Christina Parajon Skinner, assistant professor of legal studies and business ethics at the University of Pennsylvania—co-authors of the working paper—offered insights into the role of the Federal Reserve. They emphasized that it should be safeguarded from political interference and its independence maintained through transparency and public accountability. Furthermore, they underscored that Congress has a constitutional duty to ensure oversight by regulating the value of money.
As explained by Levin and Skinner on the Hoover Institution's website, monetary policy has expanded significantly in scope and complexity over the past 15 years. The traditional tools employed by Congress for monitoring Federal Reserve policies may no longer suffice for effective oversight. They contended that this situation has resulted in congressional "undersight", which in turn has undermined both the independence and public accountability of the Federal Reserve.
The authors cited two instances demonstrating the impact of congressional undersight as per information available on Hoover Institution's website. Firstly, dissents on monetary policy decisions have become scarce due to shifts in governance and power dynamics within the Federal Reserve. This lack of dissent hampers legislators' ability to understand perspectives informing Federal Reserve decisions. Secondly, when executing securities purchases (QE4) between 2020-22, the Federal Reserve did not provide lawmakers with a cost-benefit analysis or risk assessments. QE4 potentially cost taxpayers more than $1 trillion but is yet to undergo external reviews.
Levin and Skinner suggested several strategies for restoring oversight as per details provided on Hoover Institution's website. Their recommendations to legislators include strengthening reporting requirements, ensuring access to sensitive information, and authorizing external reviews by congressional watchdogs.