WASHINGTON, D.C.- On Wednesday, the House of Representatives voted 333-92 to audit the Federal Reserve, the nation’s 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 Paul’s 2012 Federal Reserve Transparency Act. At that time, it passed in the House with a 327-98 vote but stalled in the Senate due to Democratic Senate Majority Leader Harry Reid’s resistance. Though Reid supported an audit in the 1990s, by 2012 his position shifted.
Opponents of an audit claim it would politicize the Fed’s activities. Chair of the Federal Reserve, Janet Yellen, argued at a House Financial Committee Hearing in February that instituting an audit would be “interfering with the independence of monetary policy by bringing political pressures to bear on the committee’s judgment.” 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 require a Government Accountability Office (GAO) audit of the Federal Reserve board and its twelve branches within 12 months of the bill’s passage.
In a 2011, a partial GAO audit of the Fed’s 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 “financial assistance” 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 Sanders’ attempts, Congressman Ron Paul’s Federal Reserve Transparency Act, and its current House incarnation, Paul’s son, Kentucky Republican Senator Rand Paul, introduced legislation 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:
“The Fed’s 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 nation’s money supply.”
A Rasmussen poll conducted in November of 2013 found that Americans want such transparency, with 74% favoring a public audit of the Fed.
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 Act will be unable to gain traction in the Senate, which is dominated by Democrats. Still, the bill’s main sponsor, Paul Broun, said of the bill:
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“This is a vital piece of legislation that will help to usher in a new era of transparency in this nation’s monetary policy…The Federal Reserve is a creation of Congress, and it must therefore be subject to the oversight and regulation of Congress.”