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July 17, 2014 – Federal Reserve Board Chair Janet Yellen, during a hearing Wednesday, reacted strongly to a Republican bill to reshape the Fed by prescribing a rule for monetary policy, saying any such policy during the recent recession would have been a "grave mistake."

Yellen made the comment Wednesday in a hearing by the House Financial Services Committee on Fed monetary policy, similar to the hearing held Tuesday by the Senate Banking Committee.

The House panel questioned Yellen about H.R. 5018, the "Federal Reserve Accountability and Transparency (FRAT) Act," which was introduced by House Financial Services Subcommittee on Monetary Policy and Trade Vice Chairman Bill Huizenga, R-Mich., and Subcommittee on Capital Markets and Government Sponsored Enterprises Chairman Scott Garrett, R-N.J.

The bill would require, among other things, that the Federal Reserve conduct cost-benefit analysis when it adopts new rules and would demand transparency on bank stress tests. Yellen expressed concerns with the bill, saying the Fed needs to remain independent and cannot operate under or follow all the specifics presented in the legislation. She said the Fed is already the most transparent central bank in the world.

Yellen also discussed the headwinds still present in the economy, which include low productivity, tight credit and low household confidence about future earnings growth.

On the housing market, Yellen said she had expected a rebound by now and was unable to provide a simple reason for why that hasn't occurred – but she did note tight credit and inventory constraints.