Stop the Secrets: It’s Time to Audit the Fed

Two key lawmakers on the House Financial Services Committee from opposite ends of the ideological spectrum are working to reverse our current economic absurdity. Reps. Alan Grayson (D-FL) and Ron Paul (R-TX) are pushing to authorize a full, comprehensive audit of the Federal Reserve. The plan has sparked a fury from both the Fed itself and the corporate banking industry, but the proposal is so appealing that the controversy is almost laughable.

The Federal Reserve is one of the most powerful economic institutions in the world, but most of its operations are conducted in total secrecy. The Fed’s rescue activities have dwarfed the $700 billion Troubled Asset Relief Program, but there’s no public accounting.  Some of these efforts may have been entirely appropriate, but we don’t even know who the Fed is helping. That fact is a major barrier to establishing effective and fair economic policy.

As Glenn Greenwald observes for Salon:

“The Fed is a typical Washington institution that operates un-democratically and in virtually total secrecy, and a Congressionally-mandated audit that they (and much of the DC establishment) desperately oppose would be a serious step towards changing the dynamic of how things function. At the very least, it would provide an important template for defeating the interests which, in Washington, almost never lose.”

Under the Grayson-Paul plan, which is offered as an amendment to the Financial Stability Improvement Act of 2009, the Government Accountability Office would be given the authority to audit all of the Federal Reserve’s activities, just as it can audit other public programs and institutions.

Last week, the House Financial Services Committee approved the audit-the-fed bill, despite opposition from panel Chairman Barney Frank (D-MA), who tried to gut the plan. The fight for a fair economy can be won. Even on the Financial Services Committee, where the banks concentrate their campaign contributions, Grayson was able to convince 14 other Democrats to stand up to the financial establishment.

The vote of approval scarcely registered on the mainstream media’s radar, and even then, the Grayson-Paul legislation was portrayed as an assault on the Fed’s “political independence.” As Dean Baker notes for Talking Points Memo, it’s hard to see how a simple, public accounting can be construed as a political hit on the Fed’s policy-making.

By setting interest rates, the Fed has enormous power to do almost anything under the economic sun, from fueling quick growth to destroying jobs. All of these powers have useful functions under the right circumstances, and we really don’t want Congress to make decisions about the economy based on the interests of powerful lobby groups. The Grayson-Paul bill wouldn’t do anything of the sort. As John Nichols explains for The Nation, audits of sensitive economic policy decisions would be subject to a six-month lag before they could be publicly released. If the Fed needs to act fast, Congress won’t be able to get in its way. The public will eventually know how its own money is being spent, however, and learn how a public institution is conducting itself.

“In other words, this is about simple transparency, which everyone should favor,” Nichols writes.

The White House and the Congressional Democratic leadership need to support a full and comprehensive audit of the Federal Reserve. It’s an issue of basic democratic accountability. There is no good reason why economic policy should be conducted in secret.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint.  This is a project of The Media Consortium, a network of leading independent media outlets.

Dianaoctavius via Flickr/Creative Commons
By Zach Carter, Media Consortium

26 comments

Yulan L.
Yulan Lawson7 years ago

Hey Barbara H,
Right on. It's great to see people seeing it, as it happens NOW. No more conspiracy theories, because we see more and more conspiracy happening now. So the theory goes and the reality becomes that very theory. More and more Fox is unleashing the truth about climate change, especially about the leaked emails from scientists. Not polititions trying to be one.
RIGHT NOW IN AUSTRALIA GOVT EMPLOYEES ARE GOING AROUND WESTERN QUEENSLAND KNOCKING ON FARMERS DOORS... asking them how many head of cattle they have so they can work out what carbon tax to charge them. Plus, arranging through our Govt to be able to tax farmers for 3 years prior if a certain study proves that it's made a difference to global warming. COME ON LET'S ACT WHILE WE CAN.
THE FEDERAL RESERVE, which remember is privatally owned by several corporations, WANTS THIS.

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Barbara H.
.7 years ago

Audit, oversight, transparency and Stability sounds etc. Sounds good to me!! President Obama promised all those things to change in his campaign to win office. OK LET US START HERE AND NOW! Barbara H.

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MICHELE V.
Past Member 7 years ago

RIGHT ON!!

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Charlene R.
Charlene Rush7 years ago

What a maravelous idea, that will never happen.

By the way, we, the voters are partly responsible for this problem. We refuse to vote the incumbents OUT and so it stays the typical SAME OLD, SAME OLD.

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Evelyn B.
Past Member 7 years ago

Thanks for this article. Thanks for all the great comments that show we are not all fooled by the political rhetoric. There are 9 Petition on Care2 regarding Support of the Audit (H.R. 1207) and Abolishing the Federal Reserve (H.R. 833). This is not a political party issue, not Rep. or Dem. and not about who is in office because the Fed Reserve has welded it's power no matter, which party, who was President or who is in Congress or the Senate. This is about taking back our Nations' Financial Control and returning it to the Treasury and Legislature where the Constitution states it belongs. My petition to abolish the Fed. Reserve: Bill H.R. 833-Abolish the Federal Reserve . The other eight: H.R. 833 the bill to "Repeal the Federal Reserve, Promote Sustainable Economy End the FED , Abolish Federal Reserve! , Audit the Federal Reserve , The Federal Reserve Transparency Act of 2009 , Petition to force action on Federal Reserve Transparency Act of 2009 , Stop paying annual interest to the Federal Reserve, Petition for Betsey Markey's Support with H.R. 1207 They all need many, many more signatures. If you haven’t signed the petitions PLEASE do, add a great comment (so that it is assured your signature is counted individually) as are here and share with everyone. If they don’t know how the Fed works and what they have done to our country and us, share that info. with them so they understand the importance of these bills to our future as a nation and our individual well

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Yulan L.
Yulan Lawson7 years ago

I so Concur!!!! What astounds me though is that we have to actually have this discussion and questioning. Will it happen?

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Reagan B.
Reg B7 years ago

Not only a great idea for seeing where the money goes but also for seeing, line by line, if they are funding ridiculous or outdated programs.

The loudest objections raised I'm sure would come from representatives who receive the most "pork"

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Carol H.
Past Member 7 years ago

Like regular banks they have to be checked so should the government after all the population pays the bills and we should know what they are doing with our money and that is a fact.

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Samuel G.
Samuel G7 years ago

It was about time someone raised the issue! How it comes the Feds give plenty to the rich banks while starving the social services and help to the poor...This is insanity at its worst. And when the middle class is going to get a real relief from pay up tons of money for a lost war in Afghanistan (yes, it is lost and Obama is trying to cover up the mess of the Bush administration). And what about health care? Corroption is a word that is becoming more and more prevalent this days when it comes to government. For how long are we going to tolerate this state of affairs? I am fed up with it already, I think it is time for a tax revolt from the people.

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Sara T.
Sara T7 years ago

Yes! Let's audit the Federal Reserve! The corruption in our government is rampant; this is only one area! Let's audit the whole shabang!

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