At a hearing before a committee of the House of Representatives, former Fed Chairman Ben Bernanke was asked about legislation that would direct the GAO to audit the Fed’s monetary policy actions. He replied:
The term “audit the Fed” is deceptive. The public thinks that auditing means checking the books, looking at the financial statements, making sure that you’re not doing special deals, and that kind of thing. All of those things are (already) completely open…. The nightmare scenario I have is one inwhich some future Fed chairman would decide to raise the federal funds rate by 25 basis points, and somebody in this room would say, “I don’t like that decision. I want the GAO to go in and get all the records, get all the transcripts, get all the preparatory materials and give us an independent opinion on whether or not that was the right decision.”
Why would the situation Bernanke is describing be a “nightmare scenario”? Wouldn’t it be good to have the GAO give an independent opinion on whether a particular monetary policy action was the right decision?