by Ron Paul: Focus
on the Policy, NotWikiLeaks
Since the announcement
last week that I will chair the congressional subcommittee that
oversees the Federal Reserve, the media response has been overwhelming.
The groundswell of opposition to Fed actions among ordinary citizens
is reflected not only in the rhetoric coming out of Capitol Hill,
but also in the tremendous interest shown by the financial press.
The demand for transparency is growing, whether the political and
financial establishment likes it or not. The Fed is losing its vaunted
status as an institution that somehow is above politics and public
scrutiny. Fed transparency will be the cornerstone of my efforts
as subcommittee chairman.
Thanks to public
pressure earlier this year, Congress did pass legislation that requires
the Fed to disclose some information about its bailout of select
industries and companies following the 2008 financial crisis. So
two weeks ago the Fed released data concerning more than $3 trillion
of assistance it offered to banks through its bailout facilities.
After reviewing this data, however, we are left with many more questions
about the Fed’s “lending.”
In the “Term
Securities Lending Facility,” the Fed was supposed to have
loaned against AAA-rated securities – yet over half of the
collateral put up by banks to obtain loans had no listed credit
rating. Should we assume that the Fed accepted absolute junk-rated
securities as collateral for loans? Presumably these securities
were so bad that they wouldn’t even publicize their credit
rating. So why should our central bank, backed up by your taxes,
accept such collateral?
note, of the $1.25 trillion purchased under the Fed’s “Mortgage-Backed
Securities Purchase Program,” only $877 billion in purchases
have been publicized. What happened to the remaining $400 billion?
of limited disclosures by the Fed only underscore the need for a
full and complete audit of the Fed’s financial books. This
audit should be done by an independent third party, in the same
manner that public companies are audited. The Fed should make public
its balance sheet, income statement, and perhaps most importantly
its cash flow statement. It also should publicize the notes explaining
those financial statements.
We seem to
forget sometimes that Congress created the Fed – it is a government-created
banking monopoly, and its top decision-makers are appointed by the
President and confirmed by the Senate. If the Fed does not perform
satisfactorily in the eyes of these politicians and their constituents,
the Chairman and Governors may not be re-nominated.
Congress could even repeal the Federal Reserve Act altogether since
it has the authority to do so. Obviously Congress is within its
authority to audit an organization it created by statute, and it
is time to assume that responsibility.
With 320 Members of Congress cosponsoring my legislation to fully
audit the Fed in the 111th Congress, my hope is that we can build
on our broad bipartisan coalition in 2011 and continue the push
for greater Fed transparency going forward.
Paul is a Republican member of Congress from Texas.