At a hearing before a committee of the House of Representatives, Fed Chair Ben Bernanke was asked about the 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 in which 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.'"

Source: Board of Governors of the Federal Reserve System, "Testimony of Chairman Ben S. Bernanke before the House Financial Services Committee, July 18, 2012."

Fed Chair Ben Bernanke described the situation as a "nightmare scenario" since he feels it would

a. limit the independence

b. limit the budget

c.expand the duties

of the Fed.

Wouldn't it be good to have the GAO give an independent opinion on whether a particular monetary policy action was the right decision?

A. No, not if the members of the Fed worry that their opinions during the meetings will no longer be private and would be used politically. This could lead the Fed to do what is popular instead of what is efficient.

B. Yes, it would be beneficial for the Fed to be audited by Congressional investigators to ensure that it is acting in a manner that the majority of people prefer.

C. No, economists believe the Fed can only be effective if there is no transparency, and would therefore prefer no Fed oversight.

D. Yes, it would be beneficial for the Fed to be audited by Congressional investigators to ensure that it is acting in a manner that the members of Congress and the president prefer.