WASHINGTON, D.C.— Ahead of this week’s Federal Open Market Committee (FOMC) meeting, Senator Rick Scott sent a letter to Chair of the Federal Reserve, Jay Powell, urging accountability regarding his massive failure to meet his target of reducing the Fed’s balance sheet and severely misallocating capital. Senator Scott has been adamant about holding the Fed accountable to their goals of reducing the balance sheet since his election to the Senate. During Powell’s time as Chair, he has overseen a wildly unaccountable Fed, which has grossly mismanaged U.S. monetary policy and grown its balance sheet to an unsustainable $7.2 TRILLION, hurting millions of hardworking American families with skyrocketing interest rates and inflation and losing over $2 TRILLION of taxpayer money in the past two years.

Read the full letter HERE or below.

July 29, 2024

Dear Chair Powell:

I am again writing regarding the Federal Reserve’s continued failure to meet its own targets for balance sheet reduction. As I have repeatedly emphasized in our previous communications, the size of the Federal Reserve's $7.2 trillion balance sheet poses an unprecedented risk to American taxpayers and our economy.[1]

In my letter to you last November, I highlighted that the Federal Reserve’s balance sheet remained nearly half a trillion dollars higher than projected based on your own reduction plans.[2] It is alarming to see that months later, this situation has not improved.[3]

The Federal Reserve announced its new balance sheet reduction policy on May 1, 2024. This policy included slowing the pace of its balance sheet drawdown. Specifically, starting June 1, 2024, the Federal Reserve reduced the cap on Treasury securities it allows to mature and not be replaced to $25 billion per month, down from the previous cap of up to $60 billion per month. The cap for mortgage-backed securities remains at $35 billion per month, with any excess principal payments reinvested into Treasuries.[4] This means the balance sheet should be reduced by $60 billion every month beginning in June 2024.

It is unacceptable that the Federal Reserve has failed to meet its new, even lower targets. On June 6—the Federal Reserve’s first data posting since the start of its new program—the total balance sheet stood at $7.26 trillion. As of July 25, the balance sheet totaled $7.205 trillion, which equates to roughly $60 billion in total balance sheet runoff over the past seven weeks.[5] At this current pace, the Federal Reserve is already missing its new balance sheet targets.  

Looking only at U.S. Treasuries and mortgage-backed securities, the Federal Reserve is already at least $43.25 billion behind its new, lower targets within the first seven weeks of implementation. [6] Without significant reduction this week, the Federal Reserve will have severely missed its new balance sheet runoff goals. The lack of accountability shown in missing the goals you have set for yourself is alarming and must be corrected. 

The Federal Reserve's inability to adhere to its own more modest goals for balance sheet reduction is not only concerning, but also misleading to both the public and Congress about your true intentions to address this critical issue.

Further, the Federal Reserve’s new balance sheet reduction policy falls woefully short of what is needed to address the massive size of the Federal Reserve's balance sheet. It is incomprehensible why the Federal Reserve cannot meet its own goals and reduce its balance sheet at a dramatically faster pace, especially given the ongoing challenges of record inflation and rising federal debt.

In light of these concerns, I write to you today to request answers to the following questions:

• What specific factors have prevented the Federal Reserve from meeting its planned balance sheet reductions since the implementation of the new policy?
• Given these shortfalls, will the Federal Reserve revisit or change its targets for balance sheet reduction at upcoming meetings? How does the Federal Reserve intend to accelerate the pace of balance sheet reduction to catch up with its previously stated targets?
• Does the Federal Reserve plan to discuss moving away from capped targets to a more active process for reducing the balance sheet?
• How is the large size of the balance sheet, a slower pace of runoff, and the Federal Reserve’s continued purchasing of assets impacting inflation and the money supply?
• What is the Federal Reserve's long-term target for the size of its balance sheet, and what is the projected timeline to reach this goal?

I remain committed to addressing America's debt crisis and the harmful effects of inflation. It is crucial that the Federal Reserve takes immediate and decisive action to reduce its balance sheet and mitigate the risks it poses to our economy and future inflation.

I look forward to your prompt response to these important questions.

Earlier this Congress, Senator Scott introduced a legislative package aimed at forcing accountability on the Federal Reserve. This package includes:

• The Regular Order for Investments (ROI) of the Federal Reserve Act to end the Fed’s bad practices and force the Fed to consider the impact of its decisions on hard-working American families so this never happens again;
• The Right-Size the Federal Reserve Act to ensure an unwinding of the Fed’s massive balance sheet by mandating that it remain at or below 10% of U.S. GDP; and
• The Rein in the Federal Reserve Act to interject much-needed scrutiny and accountability of the Fed’s actions by establishing a statutory process for more strict oversight by Congress.

MORE…

• Sen. Rick Scott to Chair Powell: The American People Deserve Accountability for Fed Missing Targets & Fueling Inflation
• Sen. Rick Scott Demands Powell Pay Down the Fed’s Balance Sheet
• Sen. Rick Scott Urging Accountability From Powell Missing Goal of Reducing the Fed’s Balance Sheet
• Sen. Rick Scott Pushes for Accountability from New Federal Reserve Appointees
• Sen. Rick Scott Slams Fed Chair Jay Powell for Trillion-Dollar Loss, Disgraceful Leadership

Click HERE to read more from Senator Scott’s Quarterly Economic Snapshot.

Read more about Senator Scott's efforts to force accountability at the Federal Reserve and the legislative package he is fighting to pass HERE. Read more about these proposals in the Senator’s Washington Examiner op-ed HERE.

###