Federal Reserve Chairwoman Janet Yellen appeared before Congress on Wednesday for her semi-annual testimony. This, from the NYT:
Ms. Yellenâs final appearance before the presidential election in November was a master class in how many members of Congress have allowed real debate about the countryâs economic challenges to be subsumed in the broader political din.
The way the kabuki play works, the Fed Chair starts with prepared remarks that all committee members already have in their hands. On Wednesday, she flagged long-run headwinds to economic growth, and said considerable uncertainties remain for the economic outlook, including risks from China and the so-called Brexit vote in the European Union. Still, she offered a dose of optimism, noting a considerable step-up in second-quarter growth and strong consumer spending in recent months.
Then the Kabuki play moved to questions by Congresspersons. More from the NYT:
It probably tells you everything that you need to know about the current state of the Federal Reserve and monetary policy that in the first ten minutes of Yellen’s Q&A, much of the questioning revolved around issues such as bank regulation/capital requirements and the diversity hiring policies of the Federal Reserve System.
It seems that Congresspersons canât be bothered drilling down about what the Fed is really thinking about the economy. Based on yesterday’s evidence, they cannot even be bothered learning what Fed policy actually is!
House Financial Services Committee Chairman Jeb Hensarling, (R-TX), said in his opening statement that the Fed is âcomplicitâ in the failure of the Obama administrationâs economic policies and the inability of the economy to grow above a 3% annual rate. (FYI, we have hit 3% or more just nine times in the past 16 years)
It got worse:
- Bill Huizenga, (R-CA), said heâs worried the Fed has itself become a too-big-to-fail financial institution. Remember folks, the Fed can issue all the money it might require, so it is difficult to come up with a scenario where the Fed fails.
- Representative Scott Garrett, (R-NJ), accused Ms. Yellen of unfairly aiding Wall Street and worsening income inequality. From the NYT:
âWhy do you see a need to benefit Goldman Sachs?â he asked.
âIâm sorry, we are not trying to benefit the rich,â Ms. Yellen responded, before trying to interject that more than 14 million jobs had been created since the recession ended in 2009.
âExcuse me, I have the floor,â said Mr. Garrett,
- Huizenga, (R-MI), said the Fed should also have to undergo a âstress testâ like a big bank because of its $4.5 trillion balance sheet. Huizenga said he is worried the Fed is insolvent.
Yellen said the Fed has already undertaken this sort of exercise. Our balance sheet is very different…The Fed is very different from a commercial bank.
Then came the âexcess regulations are holding the economy backâ questions from Republicans:
- Randy Neugebauer, (R-TX), says there has been a âbuffetâ of new rules put on banks with little thought of the overall impact. Yellen replies that the Fed is trying to âreduce the oddsâ that banks get in trouble, and that most banks are profitable.
- Blaine Luetkemeyer, (R-MO), asks why no new banks are being chartered, again stressing burdensome regulation. Yellen says the challenging economic environment, not regulation, is the likely culprit.
- Steve Stivers, (R-OH) says that Fed regulations have held down private investment.
Yellen says Fed regulations are not out of line with international standards and the safety and soundness of the banking sector has improved.
- Sean Duffy, (R-WI) asked if government regulation was a headwind to growth, saying that businesses cite regulation as a headwind. Yellen replies: âAre you referring to our regulations?â (emphasis and brackets by the Wrongologist)
Iâm talking about government regulations…Why donât you cite it as a headwind?
Itâs very hard to quantify the extent to which regulations… [are] headwind[s], she said.
After a fruitless attempt to get Ms. Yellen to call health insurance costs for Wisconsin manufacturers a headwind, Mr. Duffy gave up in a fit of pique.
Iâll accept that as a non-answer, he said.
This hearing is an object lesson in why average people hate Congress. Committee members had a chance to drill down on the countryâs economic challenges, but see only another talking points opportunity.
Imagine what similarly ill-informed Congress critters might ask witnesses in front of a different committee, say, at the Judiciary Committee:
Is it really appropriate to hold confirmation hearings when your term ends in four years? Do we really want to saddle America with a Supreme Court justice nominated by a potential lame duck president?