WASHINGTON, D.C.- On Wednesday, the House of Representatives voted 333-92 to audit the Federal Reserve, the nationâs private, central bank. The Federal Reserve Accountability and Transparency Act, bolstered by bipartisan backing, could demand more disclosures from the secretive Federal Reserve if passed in the Senate.
The bill was introduced by Republican representative Paul Broun of Georgia and is a newer incarnation of former Texas Congressman Ron Paulâs 2012 Federal Reserve Transparency Act. At that time, itÂ passed in the House with a 327-98 voteÂ but stalled in the Senate due to Democratic Senate Majority Leader Harry Reidâs resistance. Though Reid supported an audit in the 1990s, by 2012 his position shifted.
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Opponents of an audit claim it would politicize the Fedâs activities. Chair of the Federal Reserve, Janet Yellen,Â argued at a House Financial Committee Hearing in February that instituting an audit would be âinterfering with the independence of monetary policy by bringing political pressures to bear on the committeeâs judgment.âÂ Though she has attempted to repair relations with Congress since her predecessor, Ben Bernanke stepped down in February, she remains weary of transparency.
The just-passed version of the House bill demands scrutiny over the Federal Reserve, particularly its monetary policy. Among other things, it would requireÂ a Government Accountability Office (GAO) audit of the Federal Reserve board and its twelve branches within 12 months of the billâs passage.
In a 2011, a partialÂ GAOÂ audit of the Fedâs emergency lending programs (instituted as an amendment to the Dodd-Franken Wall Street Reform bill by Independent Senator Bernie Sanders of Vermont) found that the private central bank had loaned over 16 trillion dollars to corporations and banks internationally. These loans were classified as âfinancial assistanceâ during and following the 2008 financial crisis. Sanders also introduced the Federal Reserve Sunshine Act in 2009, but it was never voted on.
In addition to Sandersâ attempts, Congressman Ron Paulâs Federal Reserve Transparency Act, and its current House incarnation, Paulâs son, Kentucky Republican Senator Rand Paul, introduced legislationÂ to audit the Federal Reserve in the Senate in February of 2013. It has still not come to a vote, though Paul threatened to block several Federal Reserve nominations in May in an attempt to spur its passage.
Paul has said:
âThe Fedâs operations under a cloak of secrecy have gone on too long and the American people have a right to know what the Federal Reserve is doing with our nationâs money supply.â
A Rasmussen poll conducted in November of 2013 Â found that Americans want suchÂ transparency, with 74% favoring a public audit of the Fed.
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The Federal Reserve Act of 1913 instituted the private bank and its authority to print money, and it still controls monetary policy today. It has been harshly criticized for its private ownership, intense secrecy, lack of accountability to Congress and the American people, quantitative easing, setting interest rates extremely low, bond buying, and bailing out corporations and banks. This week it announced a continuation of its near-zero interest rates, but hinted it may eventually raise them.
In spite of the overwhelming House vote in favor of auditing the Fed, it is largely believed the Federal Reserve Accountability and Transparency ActÂ will beÂ unable to gain traction in the Senate, which is dominated by Democrats. Still, theÂ billâs main sponsor, Paul Broun, said of the bill:
âThis is a vital piece of legislation that will help to usher in a new era of transparency in this nationâs monetary policyâŚThe Federal Reserve is a creation of Congress, and it must therefore be subject to the oversight and regulation of Congress.â