Think Tank Review

Monday, March 5, 2012

A discussion of the merits of the Sound Dollar Act by Rep Kevin Brady

At the American Enterprise Institute today a panel was assembled to talk about the merits of Rep. Kevin Brady's Sound Dollar Act. In almost a rare Washington experience, the congressman requested that his bill be thrown to the constructive wolves of monetary think tank experts and former Federal Reserve Economists right to his face.

The Sound Dollar Act is an attempt to change the dual mandate of the Federal Reserve back to a single mandate in which the Federal Reserve is to focus solely on the purchasing price of the dollar and making it sound and that the Fed role has not been defined. In Brady's view long term employment creation can't be sustained by monetary policy so therefore in his view the Fed needs to get back to brass tacks and fundamentals.

Several other policy objectives are sought after in the Brady bill. He looks at geographic diversity in Federal Reserve voting. He believes the voting on the FOMC are not representative of the Heartland of America with Washington and New York Federal Reserve banks getting an inordinate say. He also is working on ways to protect from asset bubbles mandating an inflation target. The speakers noted that there was a 13.2% inflation in the 1970's and in 1982 3.8%. "moral hazards are also targeted by forcing the Fed to publish its "lender of last resort"

In all of this Brady is committed to the independence of the Fed. However, better accountability is desired therefore the lag time on getting Federal Reserve transcripts will be be reduced from 5 years down to 3 years. Furthermore, on the accountability front Brady is targeting the funding of the Consumer Financial Protection board and moving it under a regular appropriations process. It would get rid of "slush funds"

On the basic question of the Sound Dollar Acts political future: Brady notes that he received word that the bill has just recieved the co sponsorship of Rep. Scott Garett. He is really hoping to move it forward in a bipartisan way. However he notes the bill really is about starting the debate. And at the American Enterprise Institute he got that debate in the second part of the program.