Republican lawmakers on Wednesday criticized Federal Reserve Chair Janet Yellen’s stewardship of the U.S. economy and urged her to halt work on financial regulation until President Donald Trump names new policymakers to the central bank.

In a tense hearing before the House of Representatives’ Financial Services Committee, Republicans made clear they will keep pressing the Fed to trim its large holdings of bonds and set interest rates based on established mathematical rules.

“We must be vigilant to ensure that our central bankers do not one day become our central planners,” said Jeb Hensarling, a Texas Republican and the committee’s chairman. “There is zero evidence that zero interest rates and a bloated Fed balance sheet lead to a healthy economy.”

Critics say the Fed’s push to cut and then keep rates near zero and buy huge amounts of bonds and mortgage-backed securities in response to the 2007-2009 financial crisis led to the slowest U.S. economic recovery since World War II ended.

Yellen offering warning

Hensarling is planning regulatory reforms that include congressional audits of interest rate policy when the Fed disregards policy rules, a measure Yellen said she opposes as an intrusion on the central bank’s independence.

“It would result in poor economic performance,” Yellen said during the hearing.

Trump, a Republican who criticized the Fed during last year’s presidential campaign, will be able to name three new members to its seven-member Board of Governors. It currently has two empty seats, with a third due to become vacant when Fed Governor Daniel Tarullo steps down around early April.

Hensarling and other Republicans said the Fed’s banking regulations were too intrusive and its holdings of U.S. Treasuries and mortgage-backed securities — currently around $4.2 trillion — could be fueling asset bubbles.

“Maybe we shouldn’t be expecting so much from unconventional policies,” said Kentucky Republican Andy Barr.

No new rules

North Carolina Republican Patrick McHenry urged Yellen to avoid making new rules based on talks with international banking regulators until Trump names an official to serve as the Fed’s top financial supervisor.

Yellen said Trump’s future pick for the role, which is one of the vacant seats on the Fed’s board, would likely be able to review new regulations before they come into effect.

“Nothing going on in these international discussions binds us to carry out things in our rule making process,” she said.

Yellen’s four-year term as chair ends in January 2018.
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