Legislation that would force the nation’s central banking authority to submit to an examination more exhaustive than any it has ever faced is receiving renewed prospects on Capitol Hill, uniting the ends of the political spectrum, and forcing a White House, which often boasts of being transparent, into a corner.
On Monday, Sen. Roy Blunt (R-Mo.) threw his weight behind Sen. Rand Paul’s (R-Ky.) bill to audit the Federal Reserve.
“Glad to co-sponsor Sen Paul’s bill to #AuditTheFed,” he said in a tweet.
Blunt joins more than two-dozen other GOP Senators, and one Democrat, Sen. Mazie Hirona (D-Hawaii), as co-sponsors of a bill that has long dogged the Obama administration, Wall Street elite, and central banking authorities.
Since its inception, the Federal Reserve has been subject to numerous audits, including internal reviews, oversight from agencies like the Government Accountability Office, and investigations by private inspectors.
Most recently, Sen. Bernie Sanders (I-Vt.), a self-described democratic-socialist, included a provision in the Dodd-Frank Wall Street reform bill that allowed the GAO to investigate the Fed’s lending activity during the 2008 financial crisis and subsequent government bailouts of financial institutions. Those efforts uncovered $16 trillion in near-zero-percent interest loans that flowed through the Fed and into the coffers of some of the largest banks and corporations in the world; deals that would have gone unnoticed without the audit.
Despite the revelations that came out of the Sanders amendment, other lawmakers criticized the independent Senator from Vermont, claiming that he had sold out. Although Sen. Sanders forced the disclosure of Fed activities during the recent financial crisis, his amendment allowed the central bank to keep secret a number of other activities that have always eluded auditors, including internal policy deliberations, discount window operations, and transactions with foreign central banks.
Sen. Rand Paul’s bill would bring those activities into the audit fold as well.
Companion legislation in the House sponsored by Rep. Thomas Massie (R-Ky.) has attracted 118 cosponsors including progressive Democrats like Reps. Alan Grayson (D-Fla.) and Jared Polis (D-Colo.).
In 2012, a bill introduced by Paul’s father, former Rep. Ron Paul (R-Texas), would have forced a full audit of the Fed. The legislation easily passed the House with support from a near unified GOP and 89 Democrats. The Senate, then under the leadership of Sen. Harry Reid (D-Nev.), never took up the measure.
Aides to new Majority Leader Sen. McConnell, a co-sponsor of Sen. Paul’s audit the fed bill, have indicated that it would receive a vote on the Senate floor this time around, but did not specify a timeframe.
The bill will have to overcome several hurdles in a Senate awash in contributions from the financial industry that doesn’t want its “sweet-heart deals” with the Fed revealed.
Like her predecessors, Federal Reserve Chairwoman Janet Yellen opposes a heavy-handed audit. In Congressional testimony, she said that bringing Fed activities such as monetary policy deliberations to light would add “political pressures” to the process.
“I don’t believe that the Federal Reserve is in any way corrupt,” she claimed, adding that the legislation would not enhance the “confidence of markets” in the Fed’s policymaking.
The White House, meanwhile, has been stealthier in its opposition to audit attempts. Although President Obama has never formally been presented with a bill to fully audit the Fed, he has played a role in killing similar measures on Capitol Hill in the past.
Congress approved Sen. Sanders audit amendment in 2010, but only after heavy pressure from the White House led to the measure being watered down. The Huffington Post reported that then Chief of Staff Rahm Emmanuel was personally phoning Sen. Sanders to voice opposition to the full audit.
At the time, Sen. Sanders described the pressure.
“I’ve gotta tell you, that on this amendment, you’re taking on all of Wall Street, you’re taking on the Fed, obviously, and unfortunately you seem to be taking on the White House, as well. And that’s a tough group to beat,” he said.
As The Sentinel reported in January, a key branch of the Fed last year bemoaned a review it was subject to, even though it was aware of internal problems related to the subject of the investigation.
The publication last month of a near-complete inspector general investigation into the New York Fed’s oversight of JPMorgan’s so-called “London Whale” losses showed that regulators with the organization lashed out at the review’s findings, even though at least one had known about the bank’s in-house examiners being stonewalled by superiors—an issue that the inspector general report did not even touch upon.
Parts of the report remain withheld from the public, and a less-redacted version of the investigation was only released after journalists filed Freedom of Information Act requests.
