Federal Reserve Board Chairman Ben Bernanke on Thursday admonished Congress for its efforts to reach further into the central bank's books, saying such pursuits would ultimately lead to a "bad outcome" for the U.S. economy.
Rep. Ron Paul, R-Texas, who now chairs the House Financial Services subcommittee that oversees the Fed, has been pressing to audit the Fed's monetary policies in order to have greater oversight of the central bank's decisions, primarily how it sets interest rates.
"It should be up to the Fed to make monetary policy decisions independently of short-term political influences and with an eye for long-term objectives of the economy," Bernanke said in a speech at the National Press Club.
He said such an audit would be a significant step toward direct congressional oversight of the Fed's monetary policy decision-making.
"Personally, I think it would be a very bad outcome," he said. "Central banks [that] are independent in their decision-making and have a clear mandate provide a much better outcome both in the economy and financial markets than a central bank which is being dictated by short-term considerations."
Still, Bernanke made clear that in other areas, like its liquidity efforts, the Fed is an open book and will continue to be so.
"Every aspect of the Fed's financial dealings are wide open, and we have invited" the Government Accountability Office "to come in and look at all of our extraordinary activities through the crisis and all of our ongoing financial activities," he said. "All of our assets, all of our transactions are open to the public and will be open to the public, and I'm committed to that transparency."
Bernanke also reiterated hopes that banks will expand lending, though with proper underwriting.
"We obviously don't want banks to make bad loans. … We want them to make sound loans," he said. "On the other hand, when you have a creditworthy borrower coming and asking for credit, it's in the interest of the bank, it's in the interest of the borrower and it's in the interest of the whole economy that that loan get made, so we need to find the appropriate balance."
