Special to Central Florida Politics by Bill Thompson Staff writer
(Washington, DC) – Proponents of making the nation’s central bank open its books have won a major victory.
On Wednesday, the House overwhelmingly passed a bill that calls for a full audit of the Federal Reserve’s governors and individual banks.
The measure, proposed by Rep. Ron Paul, a Texas Republican and GOP presidential candidate, seeks to pull back the curtain on the policies the Federal Reserve employed to cover big commercial banks that were facing mounting losses from foreclosures at the height of the recession.
A Senate version, proposed by Paul’s son, Sen. Rand Paul of Kentucky, has yet to come to a vote.
If the audit proposal is eventually enacted, it would mandate the most expansive review of the Federal Reserve’s ledgers in the agency’s 99-year history.
The current measure, which passed the House by a 327-89 margin, builds on legislation Paul introduced in 2009.
That bill eventually garnered 320 co-sponsors, including more than 100 Democrats, who were encouraged to support the audit by then-Congressman Alan Grayson of Orlando.
Grayson, who represented part of eastern Marion County during his time in the House, took special pleasure in Wednesday’s outcome.
He pointed out in an interview that Ron Paul first proposed an audit of the Federal Reserve almost 30 years ago but could not even get lawmakers to conduct a hearing on the idea.
Grayson added that he helped the plan gain traction, especially among Democrats, by advocating for it from his perch on the House Financial Services Committee.
That 2009 bill passed and was later rolled into the Dodd-Frank Wall Street Reform and Consumer Protection Act.
But it severely restricted the areas government auditors could investigate.
Despite the Dodd-Frank provision, according to a House report on the latest version of Paul’s bill, the Federal Reserve could still shield plenty of information about its dealings.
That included transactions with foreign central banks or governments, its deliberations or actions on monetary policy matters and communications between the Federal Reserve’s governors and their employees regarding any of those activities.
The new measure would strip away such protection.
Grayson noted that the Government Accountability Office, even with limited auditing power, still discovered the Federal Reserve had loaned $26 trillion in bailouts to banks around the world.
“The Fed departed from its traditional role in buying and selling securities,” Grayson observed. “And while the report didn’t get the attention it truly deserved, the first audit showed how much the Fed played favorites, putting Wall Street over Main Street and big banks over little banks.”
In some instances, Grayson said, the major banks whose executives sat on the regional Federal Reserve boards got bailout money while small banks in those jurisdictions got nothing.
According to that House report, when Wall Street giant Lehman Brothers went belly up in September 2008, the Federal Reserve’s balance sheet showed $900 billion, an amount that was accumulated over more than 90 years.
Seven weeks after Lehman Brothers collapsed, the bank’s balance sheet had doubled to $1.8 trillion, the report notes.
Within another six weeks, it stood at $2.4 trillion.
Even as the nation began clawing its way out of the recession, the Federal Reserve has continued to dole out money.
As of last month, its balance sheet was reported at $3 trillion, according to the House report.
“This expansion occurred primarily through unconventional means of influencing the money supply,” including deals with Europe’s central bank, the report states. “These actions can profoundly affect the economic and fiscal health of the United States, and Congress should have greater access to information about them.”
Grayson suggested that if Paul’s measure becomes law and a full audit is conducted, the public would learn that the Federal Reserve has continued to play favorites with taxpayers’ money.
“People need to know how their money is being spent,” said Grayson, who was ousted in a 2010 re-election bid by Republican Daniel Webster. “Our wealth is being transferred to Wall Street on a very large scale,” added Grayson, who seeks to return to the House in a new Orlando-area district created during this year’s redistricting process.
The Federal Reserve Transparency Act of 2012, as Paul’s bill is known, had 274 co-sponsors prior to Wednesday’s vote.
That roster included all three Republicans who represent Marion County: Webster and Reps. Cliff Stearns and Rich Nugent.
In a statement, Stearns said, “Creating this ‘money’ has to have an economic impact on the United States, and we need greater transparency into the operations of the Federal Reserve.”
“The American people should have insight into how the Federal Reserve exercises its authority, and Congress should demand greater accountability and transparency.”
One Republican joined 88 Democrats in voting against it.
Among the dissenters was Rep. Corrine Brown, a Jacksonville Democrat who also represents Marion County.
Contact Bill Thompson at 867-4117 or at email@example.com.