Rand Paul’s entrance into the 2016 presidential race looks set to cause a schism among Republicans, as their presidential primary looks increasingly like it will be a lightning rod for Wall Street-backed criticism of “Audit the Fed” legislation.
As Paul prepared to officially launch his bid, The Financial Times reported on Tuesday morning that many Republican party donors would be more openly hostile to the broad rightwing support of the bill if they didn’t need conservatives on so many other issues
“Banks fear that openly criticising the audit the Fed movement could alienate allies they need to advance their own goals, such as revising the Dodd-Frank post-crisis financial reforms,” FT noted.
Through presidential campaign influence peddling and mudslinging, that will likely change soon. Marty Regalia, chief economist for the powerful corporate lobby, the US Chamber of Commerce, told The Financial Times that the incumbent system “works well for the country.”
In the senate, Paul’s so-called “Audit the Fed” bill—The Federal Reserve Transparency Act of 2015—has 31 Republican co-sponsors and the backing of Sen. Mazie Hirono (D-Hawaii). A companion bill in the House authored by Rep. Thomas Massie (R-Ky.) has the backing of 149 colleagues—mostly Republicans.
Broadly speaking, the legislation would subject the Federal Reserve Board of Governors’ monetary policy deliberations to Government Accountability Office examinations.
Fed officials, including Chair Janet Yellen, have said this would undermine the central bank’s independence.
GAO examinations, by statute, include non-binding recommendations.
In February, Fed Governor Jerome Powell also said that Paul’s audit is unnecessary because the body isn’t one, as it is alleged, that “operates in secrecy.” He called the movement “in violent conflict with the facts.”
Fed transparency, in a narrower sense, has been an issue for certain high profile Democratic opponents of Sen. Paul’s bill—appropriately enough, mostly in the realm of the body’s information security policy.
Sen. Elizabeth Warren (D-Mass.) and House Oversight Committee ranking member Elijah Cummings (D-Md.) have since February fought with the Fed for details about internal probes into the October 2012 leak of market moving information about interest rates.
After weeks of battling, the Fed late last month finally revealed a summary of General Counsel Scott Alvarez’s probe. It had found, in March 2013, that “only a few Federal Reserve personnel” spoke to the author of an industry publication report based on sensitive inside information—non-public details about “a particular feature of the communications options discussed” by the Fed’s interest rate-setting body. Fed officials, however, reported that they were “not able to determine the source of the reference.”
The bank’s inspector general, Scott Bialek, is still looking into the case, after he reopened it in March.
Warren, it should be noted, also pressed Yellen on policy transparency at a hearing in February. She took exception to how Alvarez publicly criticized parts of Dodd-Frank that Congress later repealed, and wondered if the declarations played a role and represented official policy.
As part of that landmark 2010 legislation and an amendment championed by Sen. Bernie Sanders (I-Vt.) and Sen. Paul’s father, former Rep. Ron Paul (R-Texas), the GAO examined the Fed’s private sector emergency lending activity as a result of the 2008 financial crisis. In a 2011 report, the watchdog found that the central bank extended $16 trillion in near zero-interest emergency loans to companies and banks around the world.
