Audit the Fed

A guest post by Tim White. –GC

Writing for OpenCongress.org, Donny Shaw describes H.R. 1207 – Audit the Fed! (a bill introduced by Ron Paul – Populist, TX). He explains that the bill (introduced on Feb 26, 2009) is quickly gaining cosponsors* and:

is strongly bipartisan. It includes progressive Democrats like Rep. Alan Grayson [D, FL-8] and Rep. Henry Waxman [D, CA-30], Blue Dogs like Rep. Gene Taylor [D, MS-4] and Rep. Collin Peterson [D, MN-7], and conservatives like Rep. Michele Bachmann [R, MN-6] and Rep. Scott Garrett [R, NJ-5].

Shaw continues by mentioning the Senate counterpart to Mr. Paul’s bill:

“The contrast is pretty clear,” says Sen. Bernard Sanders [I, VT], who is sponsoring the Senate version (S.604), “if you want to know who received the money under TARP, go to the website, it’s there. If you want to know who received the money from the Fed, it ain’t there.”

S. 604 was introduced on March 16 and referred to the Committee on Banking, Housing, and Urban Affairs. Coincidentally, our own Senator Chris Dodd chairs the Banking Committee.

Here you can see Senator Sanders in his own words describing the importance of his bill:

Senator Sanders (Populist, VT) knows that transparency is important. Transparency is necessary to ensure good government.

As Banking Chairman, does Senator Dodd support transparency and good government? Or in the case of S. 604, will Senator Dodd be opposing transparency and opposing good government? Is Senator Dodd a Populist? Or is Senator Dodd a member of The Political Class?

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11 responses to “Audit the Fed

  1. Bo ItsHaky

    See our yesterday’s post:
    Auditing the Federal Reserve Should Be Top Priority
    http://www.boforcongress.com/2009/05/02/auditing-the-federal-reserve-should-be-top-priority/

    More to come tomorrow…

    From the desk of:
    Boaz “Bo” ItsHaky
    http://www.boforcongress.com
    boaz@boforcongress.com
    boaz.itshaky@gmail.com
    Follow me on:
    http://twitter.com/BoazItsHaky
    http://www.facebook.com Boaz ItsHaky

  2. Is Populist now an actual party, or designation?
    I thought Bernie Sanders was proudly self-designated as a “democratic socialist.”

  3. What are the arguments against this bill? I did a search and couldn’t find anyone speaking out against this bill. I’m just curious, because macroeconomics isn’t my forte, and I was curious why something that sounds ok at the outset might not work out so well once it’s implemented. I know that the Fed is very secretive, but isn’t there a good reason for your central bank to be somewhat secretive?

    It’s also apparent that many people think this audit is going to solve sort of everything. The pro-audit folks on the blogosphere (and there are a lot of them) have often fairly different reasons for wanting the audit. I mean, you’ve got some people thinking it’ll be the first step in the return to the gold standard, and you’ve got other people who think it’ll be the first step to restoring American union power (ok, it might not be that extreme, but it’s close).

    So I’m not for it or against it at this point. My only concern is that if this is truly the no-brainer that most of the pro-audit people make it out to be, why haven’t we done anything since 1913, when the Fed was created?

  4. newington1

    I was very surprised to see this post on here and yet very pleased. I think it’s very important to point out that every single member of Congress from Connecticut has failed to sign onto this monetary policy transparency bill.

    As the previous post points out, it does seem to be common sense doesn’t it?

    There are many power issues involved with this bill that would prevent its passage. When the Fed was instituted in 1913, its supposed job was to create market stability, provide liquidity during economic growth, and then remove liquidity from the market during downturns, recessions, etc (since the removal of liquidity is the necessary correction and reverses the detrimental excess that blows up artificial bubbles in the first place). It was also given exclusive monopoly power to print money as a RECEIPT REDEEMABLE IN GOLD. It wasnt just worthless paper money at the beginning. Throughout the next decades and FDR’s gold confiscation and price fixing, monetary policy got loose and inflation and costs went up. Then in 1971 Nixon cut the ties completely between the dollar and gold (since we couldn’t pay back our loans to other governments) and ever since the printing presses have run hog wild and been relied on to pay off bills. Every time the fed prints money it devalues the money in all of our pockets and bank accounts (also making the government who has the printing press the ability to make their debt cheaper with devalued money).

    Auditing the Fed would show how much gold they actually have in possession (real assets that are actually worth something) and how much money they actually create out of thin air to inflate our currency. They stopped reporting those figures a few years ago stating they weren’t important.The Fed has since its inception done the opposite of what it was created to do, and we have seen increased numbers and lengths of recessions and depressions. The Fed has not done their job in the slightest. Since 1913 when it was created, our dollar now is worth about 3 cents of what it was then.
    Why something has not been done before, who knows. Could it be that politicians dont normally like to attack the machine that gives them money for their pet projects during the good times? And actually JFK’s first executive order involved the beginning of the dismantling of the FED. Unfortunately he couldn’t follow through and nobody took up the torch.

    To the person who said the supporters think it will solve everything, that is not the case. Rome wasnt built in a day, you need legislation like this to get the ball rolling. Then our representatives and citizens will see exactly how bad the Fed has destroyed our currency and abused its powers and then action can be taken from there.
    This is a wonderful bill that would be an important first step in putting an end to our country paying our bills with inflation and borrowed money.

  5. What are the arguments against this bill?

    From HuffPo:

    Sanders opposed the initial TARP funds, but says that as long as money’s being spent, taxpayers ought to know where it’s going. This week, he will introduce a Sense of the Senate resolution calling on the Fed to release information to the public regarding what it’s doing with its money.

    “The argument is that it would hurt these companies if the public was made aware that they need the money. I just don’t accept that. I just don’t accept that,” says Sanders.

    http://www.huffingtonpost.com/2009/04/01/sanders-resolution-calls_n_181895.html

  6. I know that the Fed is very secretive, but isn’t there a good reason for your central bank to be somewhat secretive?

    why haven’t we done anything since 1913, when the Fed was created?

    My guess is that this situation is similar to virtually any political question. Some people will win and some people will lose.

    Seems to me that the winners will be the American public and the losers will be the people who run the Fed.

  7. I found last week’s NYTimes piece on Geithner to be eye-opening.

    http://www.nytimes.com/2009/04/27/business/27geithner.html?hp

    From that article (and a few other sources), I’ve come to understand that the Fed is structured like this:

    Bernanke is the Chairman of a federally-created Board. That Board consists of seven people (five seats currently filled).

    That Board oversees 12 privately-owned Federal Reserve Banks.

    Those 12 banks, including NY, have their own Boards.

    Geithner used to run the NY Federal Reserve Bank.

    His NY Board members?

    Jeff Immelt (GE), Jamie Dimon (Bank of America) and others:

    http://www.newyorkfed.org/aboutthefed/org_nydirectors.html

  8. Based on that perhaps simplistic explanation… doesn’t it seem as though America has (at least partially) outsourced monetary policy to private bankers?

    The bankers run huge risks. They lose big. Then their buddies like Paulson and Geithner tell us that civilization will end if we don’t bail them out?

  9. I can’t possibly imagine where this bill would lead. But I’m a firm believer that someone needs to jumpstart a conversation on American monetary policy. We haven’t had a serious one in 100 years.

    Also, Sanders mentions $2 trillion in new Fed-printed money. But according to Bloomberg, that number is more like $10 trillion.

    I think the difference is that the $2 trillion is actual printed money (or more likely electronic money), while the additional $8 trillion is in “guarantees.” I guess The Fed thinks that “guarantees” are not real money, but if someone calls in that $8 trillion in guarantees… presumably that money would be instantly printed as well.

  10. I did a search and couldn’t find anyone speaking out against this bill.

    That sounds to me like a situation where some influential people want something to happen (in this case the death of a bill in committee), but elected officials know that won’t fly with the voters. So instead, the elected officials sit silent and hope no one notices.

    A classic case of this was the $230 million bridge-to-nowhere. Sen. Coburn (Populist – OK) got pummeled by Sen. Stevens (Political Class – AK) and others. The story was that as soon as Stevens heard that Coburn was on the Senate floor discussing Stevens’ previously undisclosed earmark, Stevens marched down to the floor of the Senate to blast Coburn. Coburn was the only Senator willing to challenge the now discredited Stevens.

    A thought for some intrepid reporter… if this bill was introduced to Chairman Dodd’s committee six weeks ago… shouldn’t he at least be able to comment on the bill?

    To ask him directly “Do you support or oppose S604?” seems like a reasonable question.

  11. but elected officials know that won’t fly with the voters – if the voters know about it. So instead, the elected officials sit silent and hope no one notices.

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