Frank Said to Back Broader Fed Audits

by Sudeep Reddy

Rep. Ron Paul said he has a commitment from the chairman of the House Financial Services Committee, Barney Frank, to advance the Texas Republican's legislation opening the Federal Reserve to broader federal audits.

In an interview Friday, Mr. Paul said Mr. Frank agreed to allow a vote on the bill and to work on language that would allow the Government Accountability Office, the investigative arm of Congress, to audit the Fed's monetary-policy operations. While details are unresolved, the discussions increase the likelihood that some version of Mr. Paul's bill will pass the House.

"Barney told me, 'It's going to come. You're going to get what you want,'" Mr. Paul said. "We're going to have some hearings and we'll get a vote."

A spokesman for Mr. Frank said the Massachusetts Democrat shares the goal of increasing transparency at the Fed. But he hasn't inked specific language and "wants to be sure that some parts of the Fed are adequately protected," the spokesman said.

In recent months, the Fed has released more information about its lending, though not the identities of individual banks borrowing through its discount window. Mr. Paul said he wants the audits to find out more about the Fed's dealings with foreign central banks, foreign governments and individual firms. "I want to know who they're loaning the money to," he said.

The key unresolved issue is how to avoid the perception that Congress is interfering with Fed independence in making monetary policy. Under current law, the GAO can audit some Fed operations – such as bank regulation and consumer protection – but not its core monetary-policy decisions.

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September 1, 2009

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