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* Ryan has frequently sparred with Fed chairman
* Running mate criticized quantitative easing
* Backs congressional audits of Fed monetary policy
By Mark Felsenthal
WASHINGTON, Aug 12 (Reuters) - Paul Ryan, Mitt Romney's newly minted running mate who is known in Washington as a budget hawk, brings an extra appeal to conservatives as a vocal critic of the Federal Reserve's aggressive efforts to stimulate growth.
In picking Ryan -- a Wisconsin congressman whose provocative plan to reduce government spending has made him a favorite of the conservative Tea Party movement -- Romney shifted the conversation about the presidential race to one that starkly contrasts Republican and Democratic views on government spending and debt.
Part of that dialogue is the role of the Fed, which in the past few years has undertaken a massive effort to ease monetary policy and stimulate spending in a way that conservatives have decried as disastrous for America's future.
As the Republican chairman of the House Budget Committee and through his membership on other House panels, Ryan has frequently verbally sparred with Fed Chairman Ben Bernanke, especially over the Fed's bond buying.
After lowering interest rates to near zero in 2008 to pull the economy out of a deep recession, the Fed has bought $2.3 trillion in bonds and mortgage-related debt to support the recovery.
But many worry the bond buying, known as quantitative easing, is setting the stage for inflation.
Ryan took Bernanke to task at a hearing in February 2011 over the Fed's bond purchases, which the central bank used to pull down longer term interest rates.
"My concern is that the costs of the Fed's current monetary policy -- the money creation and massive balance sheet expansion -- will come to outweigh the perceived short-term benefits," Ryan said.
While one result of the Fed's ultra-easy monetary policy has been a weaker dollar that has boosted U.S. exports, Ryan has said there is "nothing more insidious that a country can do to its citizens than debase its currency."
Ryan has also supported moves to clip the Fed's wings.
He has backed congressional oversight of the Fed's monetary policy decision-making over Fed objections, and he supports eliminating the full employment part of the central bank's dual mandate, although many at the Fed believe the dual mandate has served the central bank well.
Ryan's arguments are likely to endear him not only to conservatives who believe Fed policies are another example of big government overreach but also to supporters of Representative Ron Paul, who believes the Fed should be eliminated and that the United States should return to a currency pegged to the value of gold or silver.
But while criticism of the Fed may appeal to some factions of the party, Ryan may need to temper some of his rhetoric to avoid rattling financial markets.
"We'll probably hear some of Fed-bashing at the convention, but I think Romney has been advised by his Wall Street friends to cool it," said Greg Valliere, a political analyst for Potomac Research Group.
Bernanke has argued in response to criticism from Ryan and others that the unusually deep recession and the painfully slow recovery required a bold and sustained response from monetary policy authorities.
"Our policies are hardly unusual," he told Ryan's panel in February of this year. "At this point almost every industrial central bank, excluding Canada which had less of a recession than we did, has a large balance sheet and low interest rates, including the ones with single mandates."
Ryan has backed legislation put forward by Paul to begin congressional audits of Fed monetary policy decisions. Paul has argued that the Fed owes the public greater accountability; Bernanke said such scrutiny would be "a nightmare" for the Fed because it would open the door to political pressure and hurt the ability of the central bank to make unpopular decisions when necessary.
The legislation passed the House of Representative with bipartisan support, but the Senate is unlikely to take it up.
The presumptive vice presidential candidate also supports narrowing the Fed's mandate to an exclusive focus on price stability. The dual mandate now requires the Fed to ensure full employment consistent with low and stable inflation.
Bernanke has said the dual mandate works well and that the Fed would probably pursue the same course of action it is following now even if its job were to focus solely on keeping inflation at bay.