​Janet Yellen defends the Fed against GOP fire

WASHINGTON - Federal Reserve Chair Janet Yellen came under fire Wednesday from House Republicans, who challenged the central bank's lack of accountability during her second day of testimony to Congress.

After she gave her semiannual economic report, GOP lawmakers on the House Financial Services Committee grilled Yellen with a basket of complaints.

They questioned her opposition to GOP legislation that would expand the ability of Congress to audit the Fed's operations. They accused her of being unduly influenced by Democrats. Rep. Sean Duffy, a Republican from Wisconsin, criticized Yellen for giving a major speech on income inequality in the midst of last fall's congressional campaigns -- just as Democrats were trying to make a major issue of income inequality.

Rep. Scott Garrett, a Republican from New Jersey, said a review of her meeting calendars painted a "pretty damning picture that the Fed is immersed and guided by partisan politics."

Yellen, who was nominated by President Barack Obama, rejected those suggestions and staunchly defended the Fed's independence.

"We meet with a wide range of groups," Yellen said, calling Garrett's descriptions of her meetings "quite a mischaracterization."

She strongly reiterated her disapproval of Republican-supported legislation that would increase congressional oversight of the central bank. GOP lawmakers are pushing two bills. One labeled "Audit the Fed" would expand the ability of the Government Accountability Office, the auditing arm of Congress, to audit the Fed's decisions on interest rate policies. The other measure would require the Fed to adopt a rule that would govern its decisions on setting interest rates.

Conservative Republicans in both the House and Senate are pushing the measures as a way to gain more control over the central bank, which they see as too secretive and too powerful a government institution.

GOP lawmakers also took issue with comments Yellen had made Tuesday before the Senate Banking Committee in which she said the audit measure would subject the Fed to undue political influence. She had said if such a measure had been in effect in the early 1980s, it might have prohibited then-Fed Chairman Paul Volcker from using politically unpopular high interest rates to break a decade-long bout of high inflation.

GOP lawmakers noted that the Fed in the late 1970s agreed to legislation pushed by Democrats to have the head of the central bank report twice a year to Congress on its conduct of monetary policy. They said they would like to see that requirement expanded to four times a year, especially because like her predecessors, Yellen meets weekly with the Treasury Secretary.

Yellen, the first Democrat to serve as Fed chairman since Paul Volcker left in 1987, said she does not discuss interest rate policies in her weekly meetings with Treasury Secretary Jacob Lew. Rather, their meetings often focus on issues the two will be facing at various international gatherings.

In her economic report, Yellen gave the same summary she delivered Tuesday before the Senate panel.

She said that the Fed is not ready to raise interest rates from record lows because the job market needs to improve further and inflation is too low. But at the same time, she set the stage for rate hikes later this year by outlining the steps the Fed will take in moving to raise rates.

Private economists believe the first rate hike will not occur before June and could slip to September or even later, especially if inflation continues to run below the Fed's 2 percent target.