This bill — known as the Sound Dollar Act — would eliminate the Federal Reserve’s dual mandate (to achieve stable prices and maximum employment) in favor of a single mandate that would focus solely on price stability. It would also require the Federal Reserve Board of Governors to establish metrics that can be used to evaluate whether long-term price stability is being achieved which include measuring the value of the U.S. dollar against other currencies and gold.
The Board would include the following in its semi-annual report to Congress:
The results of the evaluation process;
Whether the goal of price stability is being achieved;
The main monetary policy instruments and strategy used by the Board and the Federal Open Market Committee (FOMC) in pursuit of price stability;
An analysis of how the policies of the Board and the FOMC are affecting the foreign exchange rate value of the U.S. dollar.
The Treasury Dept.’s stabilization fund would be renamed as a Special Drawing Rights Fund, which would be used only to stabilize exchange rates, and the Treasury’s authority to buy and sell U.S. bonds or other credit-related securities would be repealed. Only Special Drawing Rights — which are a form of international money — could be deposited into the Fund and all funds that would’ve gone into the Fund or were already in it would be sold with the proceeds going toward paying down the national debt.
The Board would be required to “clearly articulate” a policy on serving as a lender of last resort to prevent otherwise solvent U.S. financial firms from failing and contagion from disrupting financial markets. It would also be required to release the transcripts of its meetings within three years.
The FOMC would be expanded to include representatives from each of the regional Federal Reserve banks. In unusual and exigent circumstances — like a financial crisis — the FOMC would be authorized to buy and sell U.S. debt securities and bonds with the affirmative vote of two-thirds of its members.
Funding that goes from the Federal Reserve Board to the Consumer Financial Protection Bureau (CFPB) would be eliminated and so would the CFPB fund. In effect, this would require Congress to take responsibility for funding the CFPB through the appropriations process.