House panel approves Fed audits

WASHINGTON, Nov. 20 (UPI) -- A congressional panel approved a bill that would put the traditionally independent U.S. Federal Reserve under closer scrutiny of politicians.

Fed officials opposed the measure and House Financial Services Committee Chairman Barney Frank, D-Mass., sought to soften the blow by taking the central bank's interest rate decisions off the table, but the bill proposed by Rep. Ron Paul, R-Texas, passed with support from Democrats and Republicans, The New York Times reported.

The bill that passed Thursday would require the Government Accountability Office to audit the Fed, including its emergency programs designed to prop up the economy and its bank-to-bank lending.

"This is a political warning shot. It says that Congress has a mechanism to opine about monetary policy. The fear is that every time there's a threat of higher interest rates, someone in Congress will ask for a study of the costs of higher interest rates," said Vincent Reinhart, a former Fed official, currently a senior fellow at the American Enterprise Institute.

The Fed has received its share of political second-guessing this year and has been widely criticized for failing to prevent the current fiscal crisis.