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Audit the Fed

April 21, 2009 - by Donny Shaw

Year after year in Congress, Rep. Ron Paul [R, TX-14] has introduced a bill to abolish the Fed (H.R. 833). Though the bill has a dedicated network of citizen supporters – see the End the Fed network – it has never made any legislative progress or gained a single co-sponsor.

This year, however, Paul has introduced a toned-down version, along with the original, that is gaining co-sponsors quickly and could actually get a vote this session — the Federal Reserve Transparency Act of 2009. The co-sponsor list, currently at 58, is strongly bipartisan. It includes progressive Democrats like Rep. Alan Grayson [D, FL-8] and Rep. Henry Waxman [D, CA-30], Blue Dogs like Rep. Gene Taylor [D, MS-4] and Rep. Collin Peterson [D, MN-7], and conservatives like Rep. Michele Bachmann [R, MN-6] and Rep. Scott Garrett [R, NJ-5].

Far from ending the Fed, the bill calls for a full Government Accountability Office (GAO) audit of the central bank to be completed before the end of 2010 and submitted to Congress for review.

Current U.S. Code protects the Fed’s secrecy in several important areas (31 USC 714 – Sec. 714):

Audits of the Federal Reserve Board and Federal reserve banks may not include – (1) transactions for or with a foreign central bank, government of a foreign country, or nonprivate international financing organization; (2) deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations; (3) transactions made under the direction of the Federal Open Market Committee; or (4) a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to clauses (1)-(3) of this subsection.

All of these barriers to access would be eliminated by Rep. Paul’s bill.

In the past year or so, the Federal Reserve has given banks more than $2 trillion in loan guarantees in an attempt to forestall the economic crisis. But information on where all this money has gone and what kind of securities the Fed has accepted in exchange is unavailable. Since the Fed is a quasi-public institution, they aren’t obliged to tell us, even though they are pushing around public money. “The contrast is pretty clear,” says Sen. Bernard Sanders [I, VT], who is sponsoring the Senate version (S.604), “if you want to know who received the money under TARP, go to the website, it’s there. If you want to know who received the money from the Fed, it ain’t there.”

In the Politico, Ron Paul writes, “if this audit reveals what I suspect and Congress has finally had enough, it can also pass my legislation to abolish the Federal Reserve.” Whether you support ending the Fed, like Ron Paul, or fixing the Fed in order to restore the health of our financial system, finding out what the Fed is up to – and where they have been failing – is essential to moving forward. It may sound trite, but transparency is crucial for solving our economic crisis.

One more thing: OpenCongress user emarble left a comment on the bill text suggesting a simple improvement:

In addition to increased congressional oversight, it would be nice if this provision included “all citizens who request it.” I propose the report on the audit be made available to the general public in electronic form, thereby making the Federal Reserve completely transparent.

UPDATE: via Campaign for Liberty, with Congress back from break the bill is now up to 71 co-sponsors.

(pictured above is Federal Reserve Board Chairman Ben Bernanke, center, surrounded by Fed board members.)

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