The Fed Should Be More Transparentby Ron Paul Recently by Ron Paul: Hey, Lindsey
The continuing financial crisis has made clear to many people the deep problems that exist within our financial system. One of the key decisions to be made in any of the reform proposals floating around deals with the Federal Reserve System and its powers. For nearly 100 years the Federal Reserve has operated largely in the shadows. The Fed’s monetary policy operations, including open-market operations and agreements with foreign governments and central banks, are exempt from audit by the Government Accountability Office. Congress itself never delves into these areas in the limited time it has during the Fed chairman’s semiannual appearances before the House Financial Services Committee, and any pointed questions are evaded. Former Fed Chairman Alan Greenspan was adept at this – his “Greenspan-speak” was legendary – but Chairman Ben Bernanke is no slouch, either, at giving vague and nonresponsive answers to direct questions. While I oppose giving the Fed any additional power, even members who support an expansion should support dealing with the crucial issue of Fed oversight – before proposals for giving the Fed additional power as a regulator of the financial system are discussed. Using Section 13(3) of the Federal Reserve Act, the Fed has gone on the warpath over the past two years. It has involved itself in direct financial support to individual firms such as Bear Stearns and American International Group, has developed new credit facilities to funnel money to numerous other financial companies and has boosted its balance sheet to more than $2 trillion – secure in the knowledge that the legal blocks put in place in 31 U.S.C. 714 to prevent GAO audits of the most significant of the Fed’s actions will hide it from any serious oversight. For an organization with arguably as much clout as the rest of the federal government put together to be able to escape significant oversight is a situation that needs to be rectified immediately.
This is why I introduced H.R. 1207, the Federal Reserve Transparency Act, earlier this year. I introduced similar bills in the early 1980s, but they never received nearly the attention that H.R. 1207 has. For this, we have the Federal Reserve’s actions to be thankful for. More Americans than ever are now aware of the powers that the Fed has and the extent to which it is using them. In some recent polls, 75 percent of Americans supported an audit of the Federal Reserve, which is what H.R. 1207 would do. All restrictions on GAO audits of the Fed would be lifted, and all of its books would be fair game. Not surprisingly, the Federal Reserve is opposed to H.R. 1207. One of the most often heard arguments is that opening monetary policy operations to a GAO audit would erode Fed independence. Nothing could be further from the truth. An audit of the Fed has one main goal, and that is to find out how much money is being spent and who is receiving it. Congress already dictates monetary policy to the Fed in the guise of the Humphrey-Hawkins mandates of full employment and price stability, so the Fed’s vaunted independence is already compromised in that regard. Nothing in the audit called for by H.R. 1207 should be construed as leading to increased congressional interference in or dictation of monetary policy. October 23, 2009 Dr. Ron Paul is a Republican member of Congress from Texas. © 2009 Politico
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