The secretive Federal Reserve, former lair of “masters of the universe” like Alan Greenspan and Tim Geithner and current engine of a Wall-Street-first, Main-Street-last “recovery,” is being set up by the Obama administration and Congressional leaders to get more powers.
That’s a bad idea.
But it will be made a little less bad if Congress establishes some oversight over the largely-unaccountable institution.
On Thursday, oversight won. An amendment to audit the Fed, which was modeled on a proposal long advocated by Congressman Ron Paul, R-Texas, and Congressman Alan Grayson, D-Florida, was approved on a 43-26 vote by the House Financial Services Committee.
The amendment, which was proposed on the committee by Paul and Grayson, would:
* Remove blanket restrictions on General Accounting Office audits of the Fed
* Allow auditing of every item on the Fed¡¯s balance sheet, including all credit facilities and all securities purchase programs.
A very moderate proposal, the amendment retains a limited audit exemption on the Fed’s unreleased transcripts and minutes and sets a 180-day time lag before details of the institution’s market actions may be released — both of which provide Fed governors with all the space and flexibility they might need to act in moments of economic emergency.
The amendment also notes that the approval of auditing should not be construed as interference in or dictation of monetary policy by Congress or the GAO.
In other words, this is about simple transparency, which everyone should favor.
Unfortunately, not everyone is ready to hold the Fed to account.
Democratic leaders in the House, including Financial Services Committee chair Barney Frank, D-Massachusetts, tried to scuttle the “Audit the Fed” proposal.
It would be fair to ask: What parallel universe have we entered where Democrats are the prime defenders of bad bankers and bad practices?
But, luckily, not all Democrats have gone astray.
When the committee vote came, it broke down like this:
Chairman Frank and 25 committee Democrats voted against auditing the Fed.
Grayson and 14 committee Democrats joined 28 Republicans in voting “yes” for transparency and a measure of accountability.