Treasury Dept. Opposes Fed TransparencyMarch 9, 2010 - by Donny Shaw
You would think the White House would get behind a proposal that is sponsored by a full 3/4ths of the House of Representatives, but they’re not.
Ryan Grim of Huffington Post reported today from a briefing with Treasury Secretary Timothy Geithner and a couple Treasury officials that they are “intensely opposed” to the Ron Paul-Alan Grayson bill to require a full audit of the Federal Reserve. The bill has already passed the House as a part of the broader financial reform package (H.R.4173) and it is immensely popular with the public as well as Members of Congress — the stand-alone version of it has 317 co-sponsors in the House and 33 sponsors in the Senate. According to sponsorship statistics, it’s the most popular bill in Congress right now.
According to Grim, under the ground rules of today’s briefing, “the officials could be paraphrased but not quoted, and the paraphrase could not be connected to a specific official.” So, I’ll quote a good portion of what Grim paraphrased from teh briefing:
The Treasury Department is vigorously opposed to a House-passed measure that would open the Federal Reserve to an audit by the Government Accountability Office (GAO), a senior Treasury official said Monday. Instead, the official said, the Treasury prefers a substitute offered by Rep. Mel Watt (D-N.C.), and would like to see it enacted as part of the Senate bill.
The Watt measure, however, while claiming to increase transparency, actually puts new restrictions on the GAO’s ability to perform an audit.
Asked whether he supports the House-passed measure to open the Fed to an audit, which was cosponsored by Reps. Alan Grayson (D-Fla.) and Ron Paul (R-Texas), a senior Treasury official said he is intensely opposed to it.
The official said the measure would undermine the independence of monetary policy and could restrict the ability of the Fed to act in times of crisis. He said that the GAO already has audit authority and that the chairman routinely testifies before Congress.
He said he supports full disclosure when it comes to the scale of Fed lending and wouldn’t draw a bright line around auditing certain activities, but wants to make sure it maintained its independence.
A lack of independence, he said, could lead to inflation and otherwise undermine progressive priorities.
He said, however, that he would be supportive of efforts that would help the Fed earn back some of the credibility it has lost over the past few years.
HuffPost asked if central bank liquidity swaps — foreign currency trades worth hundreds of billions of dollars — should be subject to an audit. The official said that the identity of the countries that received dollars was made public as was the amount each got. It worked well and was good policy, he said, and opening it to audit could undermine its future effectiveness.
The purpose of the swaps, he said, was to make sure that foreign central banks had enough dollars to meet their obligations. The effort kept interest rates low, he said.
No word yet as to whether President Obama would veto the financial reform bill if Congress sends it to him with the Paul-Grayson Fed transparency bill included. But we know that he tends to defer to Geithner on financial policy matters, so I would not be surprised if such a veto threat is eventually issued.