Will Ron Paul’s ‘Audit the Fed’ bill get a fair shake in 2015?
- Former Rep. Ron Paul’s desire to “Audit the Fed” may yet come to fruition in the coming year, as a much friendlier Congress takes up the issue and sends legislation to a GOP-controlled Senate – but it’s no ‘slam dunk’
For many years former U.S. Rep. Ron Paul, R-Texas, has called for an audit of the country’s central bank – the Federal Reserve – because he believes that its autonomy, coupled with its power to decide, on its own, U.S. economic and fiscal policy, is a power that needs congressional oversight.
And apparently, after more than a decade of working to convince fellow lawmakers of the need to conduct audits of the Fed, a majority of his now-former peers agreed: In September, the House passed a bill for the second time on a vote of 333-92, a larger margin than when the measure was first passed a few years earlier. The bill calls for the non-partisan Government Accountability Office (GAO) to review the Fed’s decision-making processes, and in particular on monetary policy.
As noted by The Washington Times:
Congress established the Federal Reserve a century ago. The system, which consists of a board of governors and 12 regional banks, acts as lenders of last resort to the country’s banking system, and is charged both with fighting inflation and promoting economic growth and employment.
In all that time, the Fed has never come under any sort of scrutiny or congressional oversight, short of the Senate confirmation process of naming and approving individuals nominated by the president to become chairpersons of the Fed.
As to what kind of power the Fed has wielded just in recent years following the Great Recession of 2007, this snippet from Reuters – which was reported on the confirmation of Janet Yellen as the new Fed chairman – is telling:
The Fed cut overnight interest rates to near zero in late 2008 and has quadrupled its balance sheet to more than $4 trillion through a series of massive bond purchase programs meant to push down longer-term borrowing costs.
That is real economic and fiscal power – a power that the founding fathers bestowed in Congress. Article I, Sect. 8 of the Constitution says Congress alone has the power:
To borrow money on the credit of the United States;
…and:
To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.
A central bank was never supposed to fulfill these roles. Indeed, many of the founders rejected the notion of a centralized federal bank because they feared it would grow too powerful, too independent and too difficult to control. Thomas Jefferson observed, “A private central bank issuing the public currency is a great menace to the liberties of the people than a standing army. … We must not let our rulers load us with perpetual debt.”
And yet, this is exactly what has happened; as of this writing, the U.S. national debt has surpassed an astounding $18 trillion (more than $7.5 trillion alone under President Obama and about $5 trillion under President Bush). The unfunded entitlements and liabilities bring that total to more $92 trillion, a figure that is just impossible to pay off.
Now, however, with a change in leadership in the Senate, Paul’s dream of establishing some congressional oversight over the Federal Reserve is as close to reality as it has ever been. Two years ago, outgoing Senate Majority Leader Harry Reid, D-Nev., changed his mind after campaigning on a platform that included a Fed audit; the first House-passed bill calling for an audit never made it past his desk.
But with incoming Majority Leader Mitch McConnell, R-Ky., there is a real possibility the measure could at least get a floor vote. As reported by Rare.us, a companion measure has been introduced in the Senate by none other than Ron Paul’s son. Sen. Rand Paul, from McConnell’s state of Kentucky.
There is still much opposition, however, from some of the usual suspects: Wall Street, the big banks (including foreign banks – all of which have benefitted financially thanks to Fed policies) and from Yellen herself. A couple weeks ago, she told reporters, “Back in 1978 Congress explicitly passed legislation to ensure that there would be no GAO audits of monetary policy decision-making, namely policy audits. I certainly hope that will continue, and I will try to forcefully make the case for why that’s important.”
Norman Singleton, vice president of policy for Ron Paul’s Campaign for Liberty and who spent years as Rep. Paul’s legislative director in the House, told the Washington Times, “This is popular with 75 percent of the American people, but it’s not popular among Wall Street; it’s not popular among banks; it’s not popular among foreign central banks.” He added, “These hold a fair amount of sway among both parties, so just to say that a change in party necessarily means we’ll be able to move Audit the Fed it’s better odds now than we’ve had before, but it’s not a slam dunk.”
Congress has the authority – and the people, through their elected representatives, have the right – to demand more openness from the Fed, and the sooner the better. In November 2011, Bloomberg Newsreported that big U.S. banks were beneficiaries of billions of dollars through sweetheart secret deals with The Fed during the taxpayer-funded bank bailouts, circa 2008-2009:
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates…The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”
What are YOUR thoughts – is it time to Audit the Fed? Should Congress take back its fiscal policy authority, or should the U.S. keep a central bank? GIVE US YOUR TWO CENTS below!
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