Audit the Fed in 2011

http://paul.house.gov/index.php?option=com_content&task=view&id=1807&Itemid=69

Audit the Fed in 2011
  
Since the announcement last week that I will chair the congressional 
subcommittee that oversees the Federal Reserve, the media response has been 
overwhelming.  The groundswell of opposition to Fed actions among ordinary 
citizens is reflected not only in the rhetoric coming out of Capitol Hill, 
but also in the tremendous interest shown by the financial press.  The demand 
for transparency is growing, whether the political and financial 
establishment likes it or not.  The Fed is losing its vaunted status as an 
institution that somehow is above politics and public scrutiny.  Fed 
transparency will be the cornerstone of my efforts as subcommittee chairman.

Thanks to public pressure earlier this year, Congress did pass legislation 
that requires the Fed to disclose some information about its bailout of 
select industries and companies following the 2008 financial crisis.  So two 
weeks ago the Fed released data concerning more than $3 trillion of 
assistance it offered to banks through its bailout facilities.  After 
reviewing this data, however, we are left with many more questions about the 
Fed's “lending”.
 
In the “Term Securities Lending Facility”, the Fed was supposed to have 
loaned against AAA-rated securities-- yet over half of the collateral put up 
by banks to obtain loans had no listed credit rating. Should we assume that 
the Fed accepted absolute junk rated securities as collateral for loans?  
Presumably these securities were so bad that they wouldn’t even publicize 
their credit rating.  So why should our central bank, backed up by your 
taxes, accept such collateral?
 
On another note, of the $1.25 trillion purchased under the Fed’s “Mortgage-
Backed Securities Purchase Program,” only $877 billion in purchases have been 
publicized. What happened to the remaining $400 billion? 
 
These kinds of limited disclosures by the Fed only underscore the need for a 
full and complete audit of the Fed’s financial books.  This audit should be 
done by an independent third party, in the same manner that public companies 
are audited.  The Fed should make public its balance sheet, income statement, 
and perhaps most importantly its cash flow statement.  It also should 
publicize the notes explaining those financial statements.

We seem to forget sometimes that Congress created the Fed-- it is a 
government-created banking monopoly, and its top decision-makers are 
appointed by the President and confirmed by the Senate. If the Fed does not 
perform satisfactorily in the eyes of these politicians and their 
constituents, the Chairman and Governors may not be re-nominated.

In theory, Congress could even repeal the Federal Reserve Act altogether 
since it has the authority to do so.  Obviously Congress is within its 
authority to audit an organization it created by statute, and it is time to 
assume that responsibility. 
 
With 320 Members of Congress cosponsoring my legislation to fully audit the 
Fed in the 111th Congress, my hope is that we can build on our broad 
bipartisan coalition in 2011 and continue the push for greater Fed 
transparency going forward.

-- 
dadl-ot mailing list
http://mail.thehood.us/mailman/listinfo/dadl-ot_thehood.us
http://news.gmane.org/gmane.music.dadl.ot