There is one topic of discussion in Washington, DC on Capital Hill that is receiving broad support from the left and right-auditing the Fed. I have to say, I am on board with those in Congress fighting to audit the Fed. I am one who believes transparency is key to a functioning democracy, especially when it involves central banking system. There are people who are against auditing the Fed-Obama, his administration, and the Secretary of Treasury.
So why exactly do people want to audit the Fed? Via the audit the Fed website:
The Federal Reserve, the unelected central bank of the U.S., enjoys a monopoly over the flow of our nation’s money and credit but has never been completely transparent and accountable to Congress since its creation in 1913.
Over its nearly 100 year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar while Congress has kept its hands off and its eyes closed. Since 1913, the dollar has lost over 95% of its purchasing power, aided and abetted by the Federal Reserve’s loose monetary policy.
During the current economic crisis, Congress, the Treasury, and the Fed have put us on the hook for over $12 trillion in bailouts and loans. This is in addition to our almost $12 trillion national debt. When testifying before Congress, Fed Chairman Ben Bernanke has refused to disclose which institutions have received trillions of dollars in these bailouts and loans or to give our representatives details about what deals are being made with foreign banks.
Although the Fed is currently audited by outside agencies, these audits are not thorough and do not include monetary policy decisions or agreements with foreign central banks and governments.
The crucial issue of Federal Reserve transparency requires an analysis of 31 USC 714, the section of US Code which establishes that the Federal Reserve may be audited by the Government Accountability Office (GAO), but which simultaneously severely restricts what the GAO may in fact audit. Essentially, the GAO is only allowed to audit check-processing, currency storage and shipments, and some regulatory and bank examination functions, etc. The most important matters, which directly affect the strength of the dollar and the health of the financial system, are immune from oversight.
Currently, the GAO is prohibited from auditing:
- transactions for or with a foreign central bank, government of a foreign country, or nonprivate international financing organization;
- 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
- transactions made under the direction of the Federal Open Market Committee; or
- 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 of US Code.
The GAO is also prevented from conducting on-site examinations of banks or bank holding companies without the written consent of the appropriate regulatory agency.
HR 1207, The Federal Reserve Transparency Act, and S 604, The Federal Reserve Sunshine Act, would eliminate these restrictions and mandate a GAO audit of the Fed to be completed by the end of 2010, finally delivering answers to the American people about how our money is being spent.
Many politicians like to constantly laud the benefits of transparency but fail to turn their campaign rhetoric into results. With trillions of dollars and our nation’s monetary system at stake, the time to take action is now.
In less than six months since its introduction, every Republican and nearly one hundred Democrats in the House of Representatives have cosponsored HR 1207, and a growing bipartisan coalition in the Senate for S 604 illustrates that momentum for both bills shows no signs of slowing down.
By opening all Fed operations to a GAO audit and calling for such an audit to be completed by the end of 2010, HR 1207 and S 604 would result in an historic level of transparency and accountability from the Federal Reserve.