1 The second is a proposal to require the Fed to adopt and follow a specific equation in setting monetary policy and to face immediate congressional hearings and investigation by the Government Accountability Office (GAO) whenever it deviates from the policy dictated by that equation.
2 And, third, there are discussions about imposing new limitations on the Fed’s long-held powers to provide liquidity during a financial crisis. I think these proposals are misguided for three reasons. First, they are motivated by the belief that the Fed’s response during the crisis was both ineffective and outside the bounds of its traditional role and responsibilities.