The U.S. Federal Reserve may face uncomfortably close congressional scrutiny unless it can convince lawmakers that its job in the midst of a crisis is much bigger than merely raising and lowering interest rates.

As Congress demands more information about who borrows from the Fed and how well taxpayer money is being used to try to revive the economy, the Fed -- the U.S. central bank -- is delicately lifting the veil on its own secrecy to preempt a more serious intrusion on its independence that could threaten its credibility.

The Fed will release some details this month about the sort of collateral it accepted in exchange for controversial loans to help broker the sale of Bear Stearns and prevent the disorderly collapse of American International Group Inc , a person familiar with the Fed's plans said.

Fed Chairman Ben Bernanke is considering holding regular news conferences, something his counterpart at the European Central Bank does but which is unheard of in the United States.

The push for more openness comes as Congress grows increasingly uneasy over the Fed's unorthodox handling of the financial crisis, which has blurred the boundary between monetary and fiscal policy.

With short-term borrowing costs already near zero, the Fed has moved well beyond its traditional role of adjusting benchmark rates and providing emergency loans to banks, opening up lending facilities to a wider array of companies.

I think it's going to be very difficult for the Federal Reserve as we know it to emerge in a year or so, said Vincent Reinhart, a resident scholar at the American Enterprise Institute in Washington, DC and formerly a senior Fed staffer.

Since its establishment almost a century ago, the Fed was supposed to be above political influence, with a largely free hand to guide the economy based on two principles -- promoting full employment and keeping inflation in check.

From time to time, lawmakers have given Fed officials a hard time about raising interest rates to tamp down inflation because that cools growth, which is bad news for politicians.

But Reinhart said the Fed's expanded lending programs, which have more than doubled its balance sheet in the span of a few months, posed a bigger threat to the Fed's independence.

Congress has learned that the Fed can be a valuable tool for ramping up spending without breaching budget constraints or launching into lengthy debates on Capitol Hill.

There are essentially two impulses up on the Hill, Reinhart said. One is, 'Oh my God. We have an independent agency that has such authority.' The other is 'Wow, what an opportunity, if only that independent agency had to report through me.' Together, they combine to say the Federal Reserve won't be the same Federal Reserve.

IS THAT MONETARY POLICY?

Monetary policy is clearly the purview of the Fed, and even with the occasional congressional grousing over raising rates, that role is not in question. But some lawmakers think the Fed's lending programs are treading awfully close to fiscal policy, which is Congress's domain.

The Fed hasn't spent taxpayer money -- it's put it at risk, said Alan Blinder, an economics professor at Princeton University and a former Fed vice chairman. And when you start doing that, you start crossing the line between monetary policy and fiscal policy.

Much as I hate to say this as a big believer in central bank independence, that gives a perfectly legitimate reason for congresspersons to poke their noses into the Fed's affairs. The Congress are the ones who are supposed to spend the taxpayers' money, he added.

Fed officials see the various lending programs as a logical extension of monetary policy when interest rates can't go any lower, and a necessary evil to prevent the disorderly collapse of one company from triggering a global financial meltdown.

But when insurer AIG infuriated voters and lawmakers by taking taxpayer money and then paying hefty bonuses, some in Congress thought the Fed bore some responsibility not only for failing to stop the payouts but also for refusing to say where all the money had gone.

That irritation gave rise to a nonbinding amendment approved by the Senate this month calling on the Fed to divulge the names of loan recipients.

The American people have a right to know who the Fed is lending taxpayer dollars to, how much they are getting and what the Fed is asking in return for this money, Senator Bernie Sanders, who is an Independent, said this month.

While naming names is a step too far for Fed officials who fear it would stigmatize would-be borrowers and discourage them from seeking Fed help when they need it, the central bank has conceded that it can do a better job of explaining what it's trying to do and how it's going about it.

Bernanke recently sat down for a lengthy television interview, a rarity for a U.S. central banker, and the Fed set up a Website giving more detail on its lending.

Still, many observers took the Senate vote as a clear sign that Congress thought the Fed had overstepped. That could come back to haunt the central bank.

The Fed is considering issuing its own bonds to help it shrink the balance sheet when private lending resumes. That would require approval from Congress.

AEI's Reinhart pointed out that Congress gives the Treasury authority to issue debt, but with strings attached such as setting debt ceilings and requiring regular reports.

They're not going to give it to the Federal Reserve without similar strings, he said. If you give a portion of control of your balance sheet to the Congress, I don't know how you protect the rest of your balance sheet.

(Editing by James Dalgleish)

Ben Bernanke Congress