Audit the Fed clears committee hurdle
Rep. Ron Paul’s “Audit the Fed” legislation, which would require the GAO to audit the Federal Reserve, is a step closer to passing the House. Yesterday, the House Oversight and Government Affairs Committee, chaired by Rep. Darrell Issa (R-CA), passed the measure unanimously, clearing the way for a vote on the floor next month:
The House Oversight Committee easily cleared legislation Wednesday that would require a top-to-bottom audit of the Federal Reserve.
The bill, sponsored by Rep. Ron Paul (R-Texas), was advanced by the committee on a bipartisan voice vote with no vocal opposition.
The measure, which has garnered 257 co-sponsors from both parties, would require the Government Accountability Office (GAO) to conduct a full audit of the Fed’s operations, including its monetary policy deliberations, for the first time.
Before the audit bill cleared the oversight committee on Wednesday, ranking member Elijah Cummings (D-Md.) attempted to introduce an amendment that would prevent the GAO from auditing the Fed’s deliberations on monetary policy. Cummings withdrew the amendment after Chairman Darrell Issa (R-Calif.) voiced opposition, saying it “essentially guts this bill.”
Issa maintained it was ironic that Congress took an intense interest in the $2 billion and counting in losses suffered recently by JPMorgan Chase when it “pales in comparison” to the Fed’s multi-trillion dollar portfolio.
“It is long past time for a real audit,” he said.
The bill would open up certain information to the Government Accountability Office currently excluded from audits in subsection (b) of 31 USC 714; including transactions with foreign central banks, decisions on monetary policy, transactions made via the Federal Open Market Committee and communications by members of the Fed’s Board of Governors.
While the bill would give insight into how the Federal Reserve makes its decisions, it doesn’t mean that Congress would have any say in monetary policy decisions. A member of Congress with an understanding of monetary policy can already see what they’re doing, but not how they reached their conclusions.
The Senate will be the real obstacle. That’s where, in 2010, the Audit the Fed language was essentially gutted key provisions, such as providing transparency on communication on monetary policy decisions, before it was included in the Dodd-Frank financial reform bill. However, the subsequent audit by the GAO found that the Federal Reserve loaned $16 trillion to corporations and financial institutions.
But like Issa notes, members of Congress have no problem jumping all over JP Morgan over its recent heavy loss, but some don’t want to question the Federal Reserve or find out how they’ve reached decisions that really impact us all. That, my friends, is a head scratcher.