GOP leaders say more quantitative easing by the Fed 'could exacerbate current problems.' | AP Photos GOP to Fed: No more stimulus

Republican House and Senate leaders told Federal Reserve Chairman Ben Bernanke to “resist further extraordinary intervention in the U.S. economy,” saying in a letter sent Monday that steps intended to boost growth might actually make things worse.

The letter represents an audacious move against a central bank that prizes its political independence yet has become a source of controversy for some as the country stumbles out of the 2008 financial crisis.


House Speaker John Boehner, Majority Leader Eric Cantor, Senate Minority Leader Mitch McConnell and Arizona Sen. Jon Kyl all object to a recent Fed policy that flushed $600 billion into the economy, a move they warned should not be repeated following a Fed committee meeting slated to end Wednesday afternoon.

Earlier this year, the Fed attempted to spur growth by purchasing U.S. Treasury bonds from banks by using $600 billion worth of electronically created funds. It also employed a similar maneuver — known as quantitative easing — to buy $1.25 trillion of mortgage-backed securities.

The GOP lawmakers claim that another round “could exacerbate current problems or further harm the U.S. economy.”

“Such steps may erode the already-weakened U.S. dollar or promote more borrowing by overleveraged consumers,” they wrote. “To date, we have seen no evidence that further monetary stimulus will create jobs or provide a sustainable path towards economic recovery.”

Sen. Chuck Schumer (D-N.Y.) criticized the letter as an inappropriate effort to intimidate the Fed.

“This is a heavy-handed attempt to meddle in the Fed’s independent stewardship of monetary policy,” he said in a statement. “It should be ignored by Chairman Bernanke and the Fed’s policymakers.”

The economic recovery has stalled, as growth for the first half of the year was less than a percentage point and unemployment has pushed back above 9 percent. Recent GDP revisions by the Bureau of Economic Analysis show the depth of the recession was much deeper than policymakers realized at the time.

Private economic analysts had differing opinions about the impact of quantitative easing. Some noted that a weaker dollar would make American exports more affordable overseas, aiding a long-term recovery. Others suggested that a less valuable dollar led to higher oil prices that hurt the economy.

The current economic turmoil reflects a housing market collapse that has yet to touch bottom, causing many Americans to cut back their spending as they pay down debt. The Fed has promised to keep short-term interest rates near zero, yet the prospect of cheap borrowing has not produced a boom in lending.

In a speech last month at Jackson Hole, Wyo., Bernanke emphasized that there are limits to what monetary policy can accomplish, suggesting that President Barack Obama and Congress would have to engage in some form of fiscal stimulus to help the economy.

The politically independent Fed has become a target for many Republicans.

Texas Gov. Rick Perry and former Massachusetts Gov. Mitt Romney, both presidential contenders, have said they would fire Bernanke. Perry has said that another round of quantitative easing at the height of political season could be “treasonous.”

In their Monday letter, Republican congressional leaders said the Fed should refrain from action if they can’t show clear results.

“Ultimately, the American economy is driven by the confidence of consumers and investors and the innovation of its workers,” they wrote. “The American people have reason to be skeptical of the Federal Reserve vastly increasing its role in the economy if measurable outcomes cannot be demonstrated.”