In a letter Monday to House Speaker Paul Ryan and Minority Leader Nancy Pelosi, Yellen called the proposed law a "grave mistake," that would undermine Fed policy and the greater U.S. economy.

"Unfortunately, the FORM Act attempts to increase transparency and accountability through misguided provisions that would expose the Federal Reserve to short-term political pressures," she said.

"The bill would severely impair the Federal Reserve's ability to carry out its congressional mandate and would be a grave mistake, detrimental to the economy and the American people."

The White House on Tuesday issued a veto threat for the bill because, it said, the proposal would politicize the Federal Reserve's monetary policy decisions.

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