One of “President” Donald Trump’s first acts in office most likely would be an audit of the Federal Reserve.
An audit of the nation’s central bank comes straight from the playbook of rival Republican candidate Ted Cruz supports as well as former candidate Rand Paul.
Trump criticized Cruz in a recent tweet for missing a Senate vote on an “Audit the Fed” bill in January, which failed in a vote.
It is so important to audit The Federal Reserve, and yet Ted Cruz missed the vote on the bill that would allow this to be done.
— Donald J. Trump (@realDonaldTrump) February 22, 2016
Republican candidate Marco Rubio and Democratic candidate Bernie Sanders both voted in favor of the legislation, which was proposed by Paul.
The Fed currently acts independently from the White House and Congress.
“Many Republicans believe that all of the Fed’s actions, including its monetary policy statements, should be audited by the Government Accountability Office (GAO),” CNN Money explains.
“Currently, just the Fed’s financial statements are subject to a review. They are done by the accounting firm Deloitte. Those statements are available for anyone to view on the Fed’s website.”
But the legislation also would have had wider powers.
For example, the Federal Open Markets Committee — comprised of 12 Fed officials — meets eight times a year to discuss and set short-term borrowing rates for the nation’s banks.
The four GOP presidential contenders want the GAO to be able to go further by being able to audit the goings-on of these meetings, which have been exempt since the late 1970s.
“Requiring the Government Accountability Office to conduct a full and independent audit of the Fed each and every year, would be an important step towards making the Federal Reserve a more democratic institution that is responsive to the needs of ordinary Americans rather than the billionaires on Wall Street,” Sanders said in a statement.
Some financial experts argue that such oversight would actually cause more volatility in the markets due to ever-changing policies geared to please whatever political party is in charge.
“If outside pressure is brought to bear on each and every Fed policy meeting by non-economists with narrow interests, the important work done by Fed officials will be undermined. Conservatives might want to raise borrowing costs even as the economy sputters along, while Democrats might want to push the Fed to push inflation above its preferred 2% target,” Time explained.
“These wild swings in policy will likely cause havoc in the markets as investors panic over volatile monetary policy. Stocks have rocketed or plummeted in the past based on a few select words in the Fed’s prepared statement.”
Others agree that in this case, more oversight may do more harm than good.
“You don’t need a Ph.D. in economic history to understand the importance of central bank independence,” investment adviser William Bernstein, author of The Investor’s Manifesto told Time.com Money.
“Cruz and Sanders, one suspects, favor the audit for opposing reasons — the former because he wants essentially to abolish it, and to remove the possibility of an expansive monetary policy,” says Bernstein, “whereas Sanders would want to use the audit to enforce the opposite.”
“But, of course, the audit serves your political purpose only as long as you’re in office; when you leave, it’s likely to be self-defeating,” he adds.