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'Lite' version of 'Audit the Fed' passes Senate
Posted By Drew Zahn On 05/11/2010 @ 9:29 pm In Front Page | Comments Disabled
U.S. Rep. Ron Paul, R-Texas
By a 96-0 vote, the Senate today passed an amendment to the financial reform bill that would force the Federal Reserve to disclose certain records, but falls short of the full audit requirement passed by the House last year.
U.S. Rep. Ron Paul, R-Texas, has led the charge to audit the Federal Reserve, the private organization that sets interest rates and money policy affecting everyone in the United States.
For decades those decisions have been made behind closed doors, and Paul has been trying to open the door and allow some light to fall on the procedures.
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But when efforts to force an audit came before the Senate, Bernie Sanders, the self-described socialist but politically unaffiliated senator from Vermont, put forward new language that Paul warned would strip the teeth from the House version.
“At the very last minute on the floor of the Senate, supposed compromise language was agreed to and substituted in the Sanders Amendment to the Financial Reform Bill,” Paul writes on his blog. “This language was acceptable to the administration, committee leadership and to the Fed. The trouble is, while it is better than no audit at all, it guts the spirit of a truly meaningful audit of the most crucial transactions of the Fed. In fact, rather than still calling the Sanders Amendment an audit, maybe it should instead be called more of a disclosure at this point.
“The new language of the Sanders Amendment requires a one-time disclosure from the Fed of 13(3) facilities, foreign currency swaps and mortgage-backed securities,” Paul explains. “Basically, their sins of the past would be revealed and Americans would know more about who got bailed out by the Fed and under what terms. This would be good, but it’s not nearly enough.”
To counter the Sanders Amendment, Sen. David Vitter, R-La., put forward another amendment restoring some of the original language of a more thorough audit.
The Senate today, however, voted down the Vitter Amendment with a vote of 37-62, while passing the Sanders Amendment 96-0.
Paul said he was disappointed the Vitter amendment failed, but said it appears the momentum is shifting and the days of Federal Reserve secrecy are nearing an end.
“The 37 votes our measure received in the Senate represent a strong step in our continuing work for full Federal Reserve transparency,” he said. “In addition, the passage of the Sanders Amendment is a victory for taxpayers, who will finally know who received $2 trillion of their money.”
As WND reported, Paul had earlier pointed out that even though the Federal Reserve “can enter into agreements with foreign central banks and foreign governments,” the General Accounting Office “is prohibited from auditing or even seeing these agreements.”
“Why should a government-established agency, whose police force has federal law-enforcement powers, and whose notes have legal-tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight? Particularly when hundreds of billions of dollars of currency swaps have been announced and implemented, the Fed’s negotiations with the European Central Bank, the Bank of International Settlements, and other institutions should face increased scrutiny, most especially because of their significant effect on foreign policy,” Paul has said.
So he built a coalition in the House that included 319 members – a majority – who signed on as cosponsors to a plan that would provide for the audits. The bill was approved in the House late last year, but has now been dealt a blow by the passing of the Sanders Amendment.
“Taxpayers are weary of bailing out privileged banks and corporations in the U.S., and we certainly cannot afford to bail out entire countries,” Paul said. “The possibility of this happening behind a veil of Federal Reserve secrecy is not acceptable.”
He continued, “This compromise language represents a huge missed opportunity by Congress to finally make the Fed accountable for trillions of taxpayer dollars it administers.”
The pushback against Paul’s proposal originated in the Oval Office, according to reports.
The New York Daily News said the original plan was shot down by the White House because Obama wants to protect the Fed’s current levels of privacy. The opposition had come from Deputy Treasury Secretary Neal Wolin, who said the audit plan posed problems.
So Sanders’ proposal was changed, according to Paul, to strip language demanding an audit and insert softer language that “exempts monetary policy decisions, discount window operations, and agreements with foreign central banks.”
Paul said, “This is of particular concern when several countries such as Greece, Portugal, and Spain are seeking IMF help in the midst of their financial crises, because American taxpayers provide fully 17 percent of all IMF funding,” Paul said.
Wolin said the gutted version is better, because it doesn’t compromise “the Federal Reserve’s full independence with respect to the conduct of monetary policy.”
The Wall Street Journal confirmed the maneuvering because of “pressure” from the Obama administration would allow the Federal Reserve “to sidestep legislation that would have exposed its interest-rate decision-making to congressional auditors.”
Others besides Paul and like-minded representatives have also been calling for an audit of the Fed. It’s about time, wrote Alex Newman in a commentary at The New American.
“Congress should swiftly audit the Fed. And after the American people find out what has been going on, it should be promptly abolished,” he wrote. “Instituting sound money is the best step that could be taken to ensure prosperity and prevent future economic calamity. And amidst the current heated debate on the role of the Fed, the time has never been better to accomplish it.”
Fed chief Ben Bernanke has opposed suggestions that the Fed be audited, or be forced to relinquish any of its secrecy.
Paul’s plan had earned overwhelming support in the House from its cosponsors. But it then was gutted in committee, and Paul blamed Rep. Mel Watt, D-N.C., the chairman. Watt’s congressional district includes Charlotte, headquarters of Bank of America Corp., the biggest U.S. lender.
Further investigation through OpenSecrets.org reveals the largest share of Watt’s campaign contributions in the 2008 election cycle came from the finance, insurance and real-estate industries.
But Paul’s plan then was revived by being added to a financial-reform package as an amendment. It was then approved and forwarded to the Senate.
Paul long has been a critic of the secrecy of the Federal Reserve.
“Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar,” he has said. “Since 1913, the dollar has lost over 95 percent of its purchasing power, aided and abetted by the Federal Reserve’s loose monetary policy.”
“Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations,” Paul said when the original plan to audit the Fed was introduced. “While the conventional excuse is that this is intended to reduce the Fed’s susceptibility to political pressures, the reality is that the Fed acts as a foil for the government. Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests.”
WND previously reported the Fed, despite being ordered to disclose to whom it awarded some $2 trillion in discount “stimulus” loans, continues its fight for secrecy.
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