In March, Kevin Brady (R-TX) introduced H.R.4180 (Sound Dollar Act) and Mike Lee (R-UT) introduced a companion bill (S.2247 Federal Reserve Modernization Act) in the Senate. These two bills are actually seven pieces of legislation, put into a single bill.
The first part of this bill is the “Single Mandate For Price Stability Act” which states the “Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall… define the term `long-term price stability’… and… establish metrics that the Board and the Committee will use to evaluate whether long-term price stability is being achieved.” When establishing these metrics, the “Board and Committee shall… take into consideration price indices of goods and services.” The Federal Reserve Board will also issue reports to Congress with “a determination of whether the goal of long-term price stability is being met and, if such goal is not being met, an explanation of why the goal is not being met and the steps that the Board and the Federal Open Market Committee will take to ensure that the goal is met in the future.”
The “Financial Stability And Moral Hazard Mitigation Act” specifies that “the Board of Governors of the Federal Reserve System shall clearly articulate the Board’s lender-of-last-resort policy.” The “Diversifying The Federal Open Market Committee To Reflect A 21st Century Economy Act” changes how members are elected to the Federal Open Market Committee. The act species that “1 representative from each of the Federal Reserve banks… shall be elected by the board of directors of the Federal Reserve bank that they are to represent,” whereas the committee currently has five members, each member representing between 1 and 3 regional banks.
Title 4 of this bill, “Demystification Of Monetary Policy Decisions Act,” states that the monetary policy committee “shall release meeting transcripts to the public not later than the end of the 3-year period following each meeting.” Title 5, “Exchange Rate Responsibility Act” changes the name of the “Exchange Stabilization Fund” to “Special Drawing Rights Fund” and directs the Secretary of the Treasury to “liquidate all property in the Special Drawing Rights Fund… and use all such amounts to reduce the public debt.”
Title 6, the “Credit Allocation Neutrality Act” specifies that the Federal Open Market Committee “may authorize any Federal reserve bank… to buy and sell… bills, notes, revenue bonds, and warrants” that mature within 6 months “in anticipation of the receipt of assured revenues” by any government or government agency.
Title 7 the “Bureau Of Consumer Financial Protection Funding Act” would give Congress limited oversight of Fed spending, if such spending were deemed unrelated to “the safety, soundness, and smooth functioning of the Nation’s banking and payments systems.” Given that other parts of this bill increase the Fed’s powers, I doubt Congress would claim any activity by the Fed to be unrelated to the safety, soundness, or smooth functioning of the banking industry.
There is nothing in this bill that would prevent the Federal Reserve from continuing to inflate the currency. Nothing to prevent future cycles of “boom and bust.” The “Sound Dollar Act” is another misnamed piece of legislation designed to trick the American people into supporting bad legislation. Instead of passing this bill, the Congress should pass the Free Competition in Currency Act which repeals the legal tender law, repeals the government monopoly over the creation of coins for use as currency and prohibits federal and state taxes on precious metal coins and bullion.