Fed Audit Shield Takes Blow After Ron Paul Proposal Advancesby Scott Lanman Recently by Ron Paul: Americans Deserve a Transparent Fed
The Federal Reserve’s shield from congressional audits of interest-rate decisions took a blow from lawmakers who want to open the central bank’s books to greater congressional scrutiny. The House Financial Services Committee yesterday advanced a proposal to remove a three-decade ban on audits of monetary policy and carry out an examination of the central bank. The plan was offered by Representative Ron Paul, a Republican from Texas who has called for the abolition of the Fed, and based on a bill with more than 300 co-sponsors. Lawmakers say the Fed hasn’t adequately accounted for putting taxpayer funds at risk, including aid to companies such as Citigroup Inc. and American International Group Inc. Fed Chairman Ben S. Bernanke has opposed the Paul legislation, saying it may open the door to interference in monetary policy. Yesterday’s vote is “probably not going to be helpful in terms of keeping inflation expectations low and supporting the dollar,” said Michael Feroli, a JPMorgan Chase & Co. economist in New York and former Fed researcher. The central bank “should do whatever it takes to stop this from going forward and eroding confidence in the Fed’s independence,” he said. The broader bill on financial regulation is subject to a vote by the committee, then must be approved by the House and Senate and signed into law by President Barack Obama. “This is the bill that would allow the people to win over the special interests,” Paul said during debate on the measures yesterday. “There is no doubt that the individuals opposing this amendment represent the secrecy of the Federal Reserve.” An audit “shouldn’t hurt them in any way,” he said.
‘May Be Revisited’ Barney Frank, the Massachusetts Democrat who chairs the committee and opposed the Paul measure, said the issue “may be revisited” when the legislation reaches the House floor. “It’s going to be seen as weakening the independence of monetary policy with consequent negative implications,” Frank told reporters after the vote. “People are going to be worried about the impact on the dollar, on the interest rate.” The dollar strengthened to $1.4925 per euro late yesterday from $1.4963. The dollar has weakened 6.5 percent against the euro this year. Paul, who wrote a best-selling book this year titled “End the Fed,” said provisions in his amendment would limit interference in monetary policy. The measure, co-sponsored by Representative Alan Grayson, a Democrat from Florida, would exclude any unreleased transcripts or minutes of Fed policy meetings. It calls for an audit of the Fed and its 12 regional banks by the Government Accountability Office within a year after enactment.
November 21, 2009 Dr. Ron Paul is a Republican member of Congress from Texas. © 2009 Bloomberg
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