Ron Paul Support Surges
For His Audit the Fed Bill

by Ryan Grim

The effort to increase the transparency of the Federal Reserve's operations has picked up surprising momentum over the last month, with more and more rank-and-file members of Congress steadily signing on to a bill introduced in February by Rep. Ron Paul (R-Texas) to expand the authority of the Government Accountability Office to audit the Fed.

The bill has surged past 200 cosponsors and is just five short of the 218 needed for passage. On Tuesday, Rep. John Boehner of Ohio, the Republican Leader, signed on.

Fifty-one Democrats have joined 156 Republicans so far to back HR 1207. A similar bill sponsored by Rep. Dennis Kucinich (D-Ohio) also has momentum and is on pace for a congressional hearing soon in the House Oversight and Government Reform Committee, where Kucinich is a subcommittee chairman.

The bill would authorize the GAO to audit the Fed's funding facilities, such as the Primary Dealer Credit Facility, Term Securities Lending Facility, and Term Asset-Backed Securities Lending Facility – known as TALF.

The Fed has expanded its liabilities and its balance sheet massively since September 2008, buying toxic assets and lending hundreds of billions to foreign central banks in unchecked swaps, then sending that foreign currency to U.S. banks.

On CNBC Wednesday morning, in response to a question about the bill from guest host Arianna Huffington, Grant's Interest Rate Observer editor Jim Grant endorsed a comprehensive audit of the Fed, saying that if the Fed were subject to the treatment and auditing it gives other banks, it would be found insolvent.

The House Financial Services Committee, said Chairman Barney Frank, plans to take a look at Paul's bill, HR 1207. "I think we should be moving in that direction," Frank said.

Frank wants increased oversight of the Fed but also wants other nations to be assured that the Fed is independent in how it establishes monetary policy.

"We're worried now that it might get people elsewhere worried that the Fed's losing autonomy on monetary policy. With regard to the TALF and stuff that obviously should all be out there, but this could cover the monetary policy setting," Frank said. Because the Chinese are already worried about the security of their investments in U.S. dollars, he said, "I am going to ask that we get to take a look at it from that standpoint, again, making sure that there is no perception that this will impinge on the monetary side of things."

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June 12, 2009

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