By Kristina Peterson and Michael R. Crittenden
WASHINGTON--Federal Reserve Chairman Ben Bernanke heads back to
Capitol Hill on Wednesday, this time to the House Financial Services
Committee, where he's likely in for a reprise of Tuesday's major
monetary-policy questions as well as a few rounds of indignant
lectures on the strength of the dollar.
The Republican-controlled House committee has been less friendly of
late to Mr. Bernanke, so lawmakers may ask the Fed chief sharper
versions of the questions that dominated day one of Mr. Bernanke's
semiannual appearance before the two panels: does the Fed plan to
launch another major bond-buying program? And why didn't it do more
once it knew that Barclays PLC (BARC.LN) was underreporting its
borrowing costs when helping to set a key global interest rate? But
Mr. Bernanke can expect House lawmakers to spend a bit more time than
their Senate counterparts on a few issues that have GOP legislators up
in arms:
--Dodd-Frank: While Mr. Bernanke faced a handful of questions Tuesday
on the Obama administration's landmark overhaul of financial
regulation, Wednesday's hearing should include a greater focus on the
issue. The House Financial Services Committee under GOP control has
made a point of attacking the law, with three hearings on its effect
on the economy this week alone as the law reaches its second
anniversary. Look for Mr. Bernanke to face questions on the Volcker
Rule limiting big banks' proprietary trading, whether the U.S. has
plans to bail out European banks (it doesn't) and whether the Fed is
hurting the value of the dollar.
--Rep. Ron Paul (R., Texas) isn't likely to waste his final
Humphrey-Hawkins hearing without pressing Mr. Bernanke on the U.S.
currency system and whether it is currently in peril. The Fed chief
lectured college students this spring on just how problematic the gold
standard was and he may need to return to the subject again. Then
again, he might not: Mr. Paul had breakfast at the Fed in May and
joked that he had convinced Mr. Bernanke to change his mind. A panel
of the House committee is scheduled to examine "parallel currencies"
and "alternative forms of money" next month.
--More recently, a panel of the House Oversight and Government Reform
Committee advanced Mr. Paul's bill proposing to expand government
oversight of the central bank, a topic that may surface on Wednesday.
To be clear: Fed operations are already reviewed by an outside,
independent audit firm. The Government Accountability Office also
audits the Fed's financials, including those of its monetary-policy
operations, but it does not evaluate the policy decisions behind them.
The legislation would expand the audit to review all of the Fed's
actions in a detailed report to Congress. The full House is expected
to vote on the bill next week.
--Senate lawmakers peppered Mr. Bernanke with questions on Tuesday on
the Fed's reaction after it learned in late 2007 that Barclays was
misreporting its borrowing costs in the process of helping set the
London interbank offering rate, a key global interest rate. But the
questioning is likely to intensify Wednesday under the House lawmakers
who have forced U.S. regulators to clarify what they knew and when. A
push from Rep. Randy Neugebauer's (R., Texas), chairman of the
committee's panel on Oversight and Investigation, led the Federal
Reserve Bank of New York to release a trove of documents on Friday
detailing exchanges between Barclays employees and U.S. regulators. A
Barclays employee's use of the word "rubbish" in describing the bank's
Libor submission should get some air time.
--Investors, meanwhile, will continue to parse every clause from Mr.
Bernanke to see if the Fed chairman is leaning a little more toward
QE3 than he was 22 hours earlier.
Write to Kristina Peterson at kristina.peterson@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
July 17, 2012 16:17 ET (20:17 GMT)
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