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Yellen questioned on Fed's independence, transparency in tense hearing

Published 02/25/2015, 09:10 PM
Updated 02/25/2015, 09:21 PM
Fed chair Janet Yellen dealt with tough questioning Wednesday on Capitol Hill

Investing.com -- Federal Reserve chair Janet Yellen endured heavy criticism from several members of the Republican-led House Financial Services Committee in an emotionally charged session Wednesday on Capitol Hill.

A slew of congressmen pressed Yellen on the Federal Reserve's perceived lack of transparency, her objectivity and independence from the Executive Branch in a tense hearing marred by finger pointing and several vitriolic exchanges.

From the outset, the Republicans questioned the Fed's independence from a White House, which nominated Yellen to succeed Ben Bernanke in October of 2013. Early in the session, Yellen reiterated that the central bank has no plans on urging Congress to make any major changes to the 2010 Dodd-Frank Law, which instituted some of the largest reforms to the U.S. financial system since the Great Depression. Dissatisfied with the response, Rep. Bill Huizenga (R., Michigan) jokingly referred to the stance as a 1600 Pennsylvania Ave. policy.

Shortly thereafter, Rep. Scott Garrett (R., New Jersey) repeatedly asked Yellen if she would disclose a summary of her weekly lunch meetings with U.S. Secretary of the Treasury Jacob Lew. Yellen responded by saying that the two never discussed monetary policy during the meetings. Then, after declining the request, Yellen fired back that if she ever ate breakfast with Garrett, she wouldn't release the summary of the discussion from the meal either.

Tensions mounted when Rep. Mick Mulvaney (R, South Carolina) questioned Yellen on the political ramifications of giving a speech on income inequality shortly before last year's mid-term elections. Two other congressmen had already addressed the topic during Wednesday's hearing before Mulvaney's time on the floor.

"I strongly disagree that I've taken the positions you've described," Yellen said in defending her right to deliver the speech.

Hours after the hearing ended, Rep. Jeb Hensarling (R., Texas), chairman of the House Financial Services Committee, told CNBC that he didn't understand why asking the Fed to become more transparent would hamper the central bank's ability to effectively implement monetary policy.

"There's a lot of good, smart people working at the Fed, but ultimately they have to have their assumptions tested in the court of public opinion," Hensarling said.

"The Federal Reserve doesn't have a monopoly on hiring smart economists," he added. "There's a lot of smart economists in this nation and they ought to be able to judge this policy in a more open, transparent fashion."

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