Yes, you read that right. Ron Paul’s push to audit the Federal Reserve Bank and see who received how much money in the last few years has been drastically reduced. Amidst the many costly bailouts, recipients have included banks, large companies, and even foreign countries. And now it appears that much of what has happened will remain behind closed doors.
So much for transparency. So much for accountability. Remember those bright promises made a couple years ago, opening up a new era of hope and change? In fact, you can still read those promises made by our President on the official government web site. I’ll quote some of it:
My Administration is committed to creating an unprecedented level of openness in Government. We will work together to ensure the public trust and establish a system of transparency, public participation, and collaboration. Openness will strengthen our democracy and promote efficiency and effectiveness in Government.
Government should be transparent. Transparency promotes accountability and provides information for citizens about what their Government is doing. Information maintained by the Federal Government is a national asset. My Administration will take appropriate action, consistent with law and policy, to disclose information rapidly in forms that the public can readily find and use. Executive departments and agencies should harness new technologies to put information about their operations and decisions online and readily available to the public. Executive departments and agencies should also solicit public feedback to identify information of greatest use to the public.
Done laughing? (Or crying?)
Seriously, there’s just too much low-hanging fruit there for me to even bother picking it apart, so lets move along and see what this has to do with the subject at hand. An article by PR Wall Street sets the scene:
The House-passed version of the financial reform bill contains the basic language of HR 1207 (in the Paul-Grayson amendment). However, a similar amendment offered by Senator Vitter to the Senate version was rejected by the Senate. Thus, it is essential that conferees consider adding the undiluted language of the Paul-Grayson amendment when reconciling the Senate and House versions of the Financial Reform Bill. Only the full language of the Paul-Grayson amendment will insure a thorough, complete, and ongoing audit of the Fed.
“This Financial Reform bill is set to grant sweeping new powers to the Federal Reserve, which has made a mess of our economy. If my colleagues insist on expanding the power of the Fed, the very least they can do is require the Fed to be transparent rather than secretive in its actions,” stated Congressman Paul. “Luckily, many of the conferees already have demonstrated their concern about transparency by cosponsoring HR 1207, and hopefully those conferees will insist on full transparency in the conference report.”
But instead, our representatives have decided—essentially on our behalf—that we really don’t want to know what’s going on within the ivory-paneled walls of the Federal Reserve. No, it’s best to leave that one to the “experts”. These are the same guys under whose watch our financial system completely melted down, mind you. These are the guys who created the “cheap money” that caused the bubble in the housing sector. Experts.
Some of these experts just happened to be former executives at places like Goldman Sachs, Lehman Brothers, AIG, Merrill Lynch, etc. So what? A look at even more names of people and organizations reveals that those appointed to oversee and regulate the banks were also cronies with those bank executives, or with and within the US Treasury, or with and within the Fed. It’s a real mess, and in case you didn’t get enough of this stuff over the last three years, there’s an excellent summations at Source Watch for reference.
Well, what happened with the proposed audit measures? This article from Reuters provides some details of this head-in-the-sand maneuver:
WASHINGTON, June 15 (Reuters) – The Federal Reserve scored a political victory on Wednesday as Democrats mulling financial reform backed off measures that would expose monetary policy to audits and make the head of the New York Fed a political appointee.
. . .
But in a statement on Tuesday, House Democrats participating in negotiations over a final financial reform bill signaled a willingness to live with a narrower Senate audit provision that does not cover monetary policy.
Well, it’s not quite as bad as all-or-nothing. It turns out there will be some degree of audit coming up, but this audit will be specifically limited in its scope:
The shift by House Democrats was not an unequivocal win for the Fed. Their counteroffer looks to broaden a proposal for a one-time Fed audit contained in the the Senate bill that would focus narrowly on the Fed’s emergency lending during the financial crisis.
House Democrats want to widen the audit to cover regular discount window lending and open market transactions, and require the Fed to publicly disclose details on these operations on an ongoing basis, albeit with a three-year lag.
Still, the push points to successful lobbying efforts by both the Fed and the financial sector, which firmly backs the U.S. central bank. Influential industry groups wrote to the Senate Banking Committee in March pleading for the Fed to retain its supervisory responsibilities.
Sort of makes you wonder why our representatives lost their thunder from a few months ago, eh?
Ron Paul has long-championed a thorough audit of the Fed for quite some time—and that only as a concession to not putting an outright end to this shadow bank. Why? Well, because responsibility of governing things like national debt, borrowing, international commerce, coining money, and setting the value of currency fall under the jurisdiction of Congress (see Article 1, Section 8 of the Constitution), not of a central bank.
But today, nearly all those responsibilities have been ceded to the Federal Reserve—and are not even visible to Congress, who has shirked these duties since the institution of the Fed in 1913. In fact, if we look at the Wikipedia article on our national bank, we see the conspicuous presence of congressional responsibility listed as the duty of the Fed:
The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States. It was created in 1913 with the enactment of the Federal Reserve Act, and was largely a response to a series of financial panics, particularly a severe panic in 1907. Over time, the roles and responsibilities of the Federal Reserve System have expanded and its structure has evolved. Events such as the Great Depression were major factors leading to changes in the system. Its duties today, according to official Federal Reserve documentation, fall into four general categories:
- Conducting the nation’s monetary policy by influencing monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.
- Supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system, and protect the credit rights of consumers.
- Maintaining stability of the financial system and containing systemic risk that may arise in financial markets.
- Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system.
Hmmm. Looks like Congress simply doesn’t really have much to do with monetary policy oversight at all anymore, now that these duties have been safely tucked away with the Fed.
Why is all this so important? Remember, the banks have done quite well through this financial meltdown, and have done so at your expense. How did they do that? This was, after all, a financial meltdown. Wouldn’t we expect the banks to have suffered the largest losses? Yes. Why didn’t they? I’m sure you remember the rash of bailouts that recently went around, right? The folks who authorized the bailouts were also those overseeing this disastrous loss of American capital. The watch dogs are the golfing buddies they used to work with at Goldman Sachs (see Treasury Secretary Henry Paulson, for instance). What’s good for the banks is what’s good for the watch dogs. And now, apparently, what’s good for the banks is also what’s good for our representatives.
We already know the taxpayers will pay for everything. What the Federal Reserve and our representatives apparently want to remain opaque is how much, exactly, they have benefited at taxpayer expense. And it would appear the list includes those working for the Federal Reserve, those working in large banks and other companies, and even those working in our government. I guess it’s good to have friends in low places.