End the Fed's Secretiveness

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Before
the US House of Representatives, February 26, 2008

Madame Speaker,

I rise to introduce the Federal
Reserve Transparency Act
. Throughout its nearly 100-year history,
the Federal Reserve has presided over the near-complete destruction
of the United States dollar. Since 1913 the dollar has lost over
95% of its purchasing power, aided and abetted by the Federal Reserve’s
loose monetary policy. How long will we as a Congress stand idly
by while hard-working Americans see their savings eaten away by
inflation? Only big-spending politicians and politically favored
bankers benefit from inflation.

Serious discussion of proposals to oversee the Federal Reserve
is long overdue. I have been a longtime proponent of more effective
oversight and auditing of the Fed, but I was far from the first
Congressman to advocate these types of proposals. Esteemed former
members of the Banking Committee such as Chairmen Wright Patman
and Henry B. Gonzales were outspoken critics of the Fed and its
lack of transparency.

Since its inception, the Federal Reserve has always operated in
the shadows, without sufficient scrutiny or oversight of its operations.
While the conventional excuse is that this is intended to reduce
the Fed’s susceptibility to political pressures, the reality is
that the Fed acts as a foil for the government. Whenever you question
the Fed about the strength of the dollar, they will refer you to
the Treasury, and vice versa. The Federal Reserve has, on the one
hand, many of the privileges of government agencies, while retaining
benefits of private organizations, such as being insulated from
Freedom of Information Act requests.

The
Federal Reserve can enter into agreements with foreign central banks
and foreign governments, and the GAO is prohibited from auditing
or even seeing these agreements. Why should a government-established
agency, whose police force has federal law enforcement powers, and
whose notes have legal tender status in this country, be allowed
to enter into agreements with foreign powers and foreign banking
institutions with no oversight? Particularly when hundreds of billions
of dollars of currency swaps have been announced and implemented,
the Fed’s negotiations with the European Central Bank, the Bank
of International Settlements, and other institutions should face
increased scrutiny, most especially because of their significant
effect on foreign policy. If the State Department were able to do
this, it would be characterized as a rogue agency and brought to
heel, and if a private individual did this he might face prosecution
under the Logan Act, yet the Fed avoids both fates.

More importantly, the Fed’s funding facilities and its agreements
with the Treasury should be reviewed. The Treasury’s supplementary
financing accounts that fund Fed facilities allow the Treasury to
funnel money to Wall Street without GAO or Congressional oversight.
Additional funding facilities, such as the Primary Dealer Credit
Facility and the Term Securities Lending Facility, allow the Fed
to keep financial asset prices artificially inflated and subsidize
poorly performing financial firms.

The Federal Reserve Transparency Act would eliminate restrictions
on GAO audits of the Federal Reserve and open Fed operations to
enhanced scrutiny. We hear officials constantly lauding the benefits
of transparency and especially bemoaning the opacity of the Fed,
its monetary policy, and its funding facilities. By opening all
Fed operations to a GAO audit and calling for such an audit to be
completed by the end of 2010, the Federal Reserve Transparency Act
would achieve much-needed transparency of the Federal Reserve. I
urge my colleagues to support this bill.

See
the Ron Paul File

February
28, 2009

Dr. Ron
Paul is a Republican member of Congress from Texas.

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Paul Archives

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