Federal Reserve Audit Overwhelmingly Passes through House

[Favre4Ever+ 4,476]

"The Fed creates trillions of dollars out of nothing and gives it to banks. Congress is in the dark. The Fed sets the stage for the subprime meltdown. Congress is in the dark. The Fed takes a dive on LIBOR. Congress is in the dark. The Fed doesn’t tell regulators what is going on. Congress is in the dark," Kucinich shouted on the House floor, just before the vote.

 

"It is time for us to bring the Fed into the sunshine of accountability," he said.

 

Despite the broad support in the House, a senior Senate Democratic aide signaled the bill isn't likely to go anywhere in that chamber in the near future.

 

"Not this work period," the aide said about the Senate acting on the bill ahead of the month-long August recess. "Don’t know about September, but I doubt it."

 

Another top Senate Democratic aide concurred that the bill likely won't go anywhere, but speculated it could resurface in a different form.

 

"We probably won’t bring it up," said the aide, adding that Paul's son, Sen. Rand Paul (R-Ky.), "will probably start insisting on this as an amendment to everything under the sun, so it's possible it comes up for an amendment vote at some point."

 

"It would not be the craziest amendment we've voted on," the aide said.

http://www.huffingtonpost.com/2012/07/25/federal-reserve-audit-bill_n_1702879.html

 

Lol at a bill with so much support "likely not going anywhere". What a joke.

 

End the Fed...

Edited July 25, 2012 by Favre4Ever

[Sarge+ 3,436]

It's only crazy because it makes sense.

 

Also, this:

"It is time for us to bring the Fed into the sunshine of accountability"

 

[SteVo+ 3,702]

Gotta love how the Democrat-controlled Senate says they won't even put this to a vote. Idiots.

[Guest Phailadelphia]

Attempting to allow Congress to audit the Fed is beyond idiotic. For the American economy's sake, you all had better hope the Senate doesn't pass this.

[Favre4Ever+ 4,476]

Mind expanding expanding at all? While I admire your vague posts, you could do better.

[Guest Phailadelphia]

Mind expanding expanding at all? While I admire your vague posts, you could do better.

 

You're giving a bunch of short-sighted monkeys who will abandon any and all ethics or morals at the drop of a hat in favor of PAC money to oversee the workings of the Federal Reserve? That's economic suicide. Ron Paul, for whatever reason, would prefer Congress to oversee monetary policy and return to a commodity-based currency, two ideas that are both unwise. Why do you want these people overseeing or possibly even trying to implement monetary policy? This Congress can't even agree on a fucking debt ceiling increase, A ROUTINE PROCEDURE, and you lot want to give them control over monetary policy? And who (besides the nutso Ron Paul) believes commodity-based currency is going to solve inflation woes? Economists don't.

 

“The spirit of the Paul bill seems to be that having FOMC meetings live on C-SPAN would be best way to make monetary policy. That would be a disaster.” -Anil Kashyap (an economist at the University of Chicago)

 

“If the markets and foreign investors perceive it that way, it could immediately push up borrowing costs even if the audits are only a symbolic increasing of congressional oversight of monetary policy.” Michael Feroli, economist for JPMorgan

 

Want to know what the Fed is doing? The GAO audits non-policy aspects of the Fed each year. This was introduced in the Dodd-Frank legislation that regulates Wall Street the Democrats passed last year. And twice a year the "Humphrey-Hawkins" speech is given to Congress, where the Chairman explains what the Fed is doing and why. That's readily accessible information to anyone.

 

The bottom line is you're asking Congress to politicize monetary policy. I don't think I have to explain why that would be disastrous for the economy. The Fed is an independent institution so as to insulate it from short-term political pressure or from currying favors within Congress as our first National Bank did.

Edited July 26, 2012 by Phailadelphia

[Guest Phailadelphia]

This bill seems to be pretty popular among voters but I can't help but believe it's just Republicans appealing to the populist vote during an election year. They've been against RP's Audit the Fed nonsense (and rightfully so) for a very long time. Did they suddenly have a change of heart? I doubt it. After the bailouts and the recent Tea Party wave, Republicans probably are trying to ride the anti-big government and anti-Wall Street bandwagon for more votes. And it might work. But they knew when they voted for this it has a snowball's chance in hell of passing through the Senate or being signed into law by President Obama.

 

Edit: For the record, I think it's pretty childish to neg a political post then not offer a rebuttal. If you disagree with me, why?

Edited July 27, 2012 by Phailadelphia

[CARDINAL 205]

This bill seems to be pretty popular among voters but I can't help but believe it's just Republicans appealing to the populist vote during an election year. They've been against RP's Audit the Fed nonsense (and rightfully so) for a very long time. Did they suddenly have a change of heart? I doubt it. After the bailouts and the recent Tea Party wave, Republicans probably are trying to ride the anti-big government and anti-Wall Street bandwagon for more votes. And it might work. But they knew when they voted for this it has a snowball's chance in hell of passing through the Senate or being signed into law by President Obama.

 

But Taylor, don't you agree that the Federal Reserve could be more transparent in the way it does business, meaning like how they appointment members to certain high ranking positions and other things like that.

*ASIDE* I was wondering, have you read the entire text of the bill?

[Guest Phailadelphia]

But Taylor, don't you agree that the Federal Reserve could be more transparent in the way it does business, meaning like how they appointment members to certain high ranking positions and other things like that.

*ASIDE* I was wondering, have you read the entire text of the bill?

 

Huh? There is complete transparency in how the Fed's members are appointed or elected.

 

 

The Board of Governors is appointed by the President.

 

The FOMC (Federal Open Market Committee), which is responsible for monetary policy decisions, is comprised of 7 members from the Board of Governors and 5 members from the regional Federal Reserve banks, who rotate on 2-3 year terms. These members of the FOMC elect the Federal Reserve Chairman and the New York Fed's president acts as vice chairman (he is always a member of the FOMC).

 

The presidents of the regional Fed banks are nominated by that bank's board of directors then approved by the Fed's Board of Governors. I could go on. All this information is available on the Fed's website.

 

No, I haven't had time to read the entire text of the bill yet.

[CARDINAL 205]

Huh? There is complete transparency in how the Fed's members are appointed or elected.

 

 

The Board of Governors is appointed by the President.

 

The FOMC (Federal Open Market Committee), which is responsible for monetary policy decisions, is comprised of 7 members from the Board of Governors and 5 members from the regional Federal Reserve banks, who rotate on 2-3 year terms. These members of the FOMC elect the Federal Reserve Chairman and the New York Fed's president acts as vice chairman (he is always a member of the FOMC).

 

The presidents of the regional Fed banks are nominated by that bank's board of directors then approved by the Fed's Board of Governors. I could go on. All this information is available on the Fed's website.

 

No, I haven't had time to read the entire text of the bill yet.

 

post the link to the bill in it's legislative form if you don't mind Taylor! Thanks man!

[Guest Phailadelphia]

http://www.gpo.gov/fdsys/pkg/BILLS-112hr459eh/pdf/BILLS-112hr459eh.pdf

 

Edit: Read through the legislation tonight. This particular section is scary:

(2) CONTENTS.—The report under paragraph

2 (1) shall include a detailed description of the find3

ings and conclusion of the Comptroller General with

4 respect to the audit that is the subject of the report,

5 together with such recommendations for legislative

6 or administrative action as the Comptroller General

7 may determine to be appropriate.

 

Legislation or administrative action? No thank you.

Edited July 28, 2012 by Phailadelphia

[CARDINAL 205]

http://www.gpo.gov/fdsys/pkg/BILLS-112hr459eh/pdf/BILLS-112hr459eh.pdf

 

Edit: Read through the legislation tonight. This particular section is scary:

 

 

Legislation or administrative action? No thank you.

 

I think your interpretation of the bill is a bit off. It's just basicly saying that the CG has to include some recommendations for and/or legislative or administrative changes that should be enacted in the Federal Reserve Bank System to help learn lessons from the 2008 Financial and Housing Crisis where the Federal Reserve bailed out dozens of financial institutions. I think that it's a pretty good bill in that it's trying to fully understand what the Federal Reserve did in the middle of the financial crisis, and what things can be changed to the functions and administrative and/or legislative framework of the Federal Reserve. This just seems like Ron Paul and other like minded congressmen and congresswomen are trying to solve the problems associated with the financial crisis. Auditing and passing and implementing any necessary remedies to the Federal Reserve just seems like one of the things that Congress should be doing to help prevent another financial and severe housing crisis in the future!

 

Would you agree with my assessment with the bill Taylor? (I read through the entire bill by the way that was posted on that link you posted on this thread!!!)

[Guest Phailadelphia]

I think your interpretation of the bill is a bit off. It's just basicly saying that the CG has to include some recommendations for and/or legislative or administrative changes that should be enacted in the Federal Reserve Bank System to help learn lessons from the 2008 Financial and Housing Crisis where the Federal Reserve bailed out dozens of financial institutions.

 

The Federal Reserve was initially created with the intent of bailing out financial institutions in times of crises. It's duties have been expanded, but that is still its job primarily.

 

I think that it's a pretty good bill in that it's trying to fully understand what the Federal Reserve did in the middle of the financial crisis, and what things can be changed to the functions and administrative and/or legislative framework of the Federal Reserve. This just seems like Ron Paul and other like minded congressmen and congresswomen are trying to solve the problems associated with the financial crisis. Auditing and passing and implementing any necessary remedies to the Federal Reserve just seems like one of the things that Congress should be doing to help prevent another financial and severe housing crisis in the future!

 

Would you agree with my assessment with the bill Taylor? (I read through the entire bill by the way that was posted on that link you posted on this thread!!!)

 

Your analysis of the bill implies the Fed is responsible for the crisis. In the grand scheme of things it's only slightly responsible imo. You could argue they kept interest rates too low for too long throughout the decade, but that wouldn't have changed the fact that Congress was very quickly deregulating banks and financial institutions while they began compiling billions of dollars worth of toxic assets. The culprits of the crisis are financial institutions first and foremost. The Glass-Steagall act did a great job of preventing crises from the 1930s-1970s before Congress began repealing its provisions in the '80s under Reagan and then moreso under Clinton and Bush. The new Frank-Dodd bill began as a great regulatory framework but the financial industry's lobbying army has mostly taken the teeth out of it.

 

I think Ron Paul is looking in the wrong places if he wants answers for the 2008 financial crisis, but I doubt that is his intent at all. He's been preaching this "End the Fed" nonsense for years. This is just an attempt to weaken the institution if he isn't able to destroy it altogether (which, let's be real, is incredibly idiotic. But that's another debate for another time).

Edited August 5, 2012 by Phailadelphia

[Omerta+ 1,206]

I believe I am in Phail's corner in this one. You want me to believe that a big-business party (REp) and the Tea Party (Fiscal responsibility) are going to keep accurate books when as of right now ethical business practices and accounting is not something I would consider their forte as is.

 

AS to the deregulation thing Phail also has a point in the fact that all of the afore mentioned acts were doing a good job and once people start repealing their provisions we run into problems and this is mere coincidence? I call bullshit.

 

I am not going to go as far as to say this is economic suicide, but I think their are a lot of things that could go terribly wrong.

 

I am all for accountability but with greed and corruption running rampant in congress you are going to have to show me specifically who is going to run the show and why he is a viable candidate for the job.

 

I can tell you right now that there are few if any people in the senate that I want doing it.

[Guest Phailadelphia]

For anyone interested in reading up on the build-up of the 2008 financial crisis, what happened, and who's at fault, I highly recommend these 2 books:

 

"All the Devils Are Here" by Bethany McLean and Joe Nocera, and

"13 Bankers," by Simon Johnson and James Kwak

[Guest Phailadelphia]

I was doing some preliminary research today on a paper I'm writing and came across this article on Ron Paul and the Fed. It was written a couple of years ago but it's very relevant to this discussion.

 

http://www.economist.com/blogs/freeexchange/2009/07/how_free_is_the_fed

 

How free is the Fed?

 

Jul 21st 2009, 20:24 by The Economist | WASHINGTON

 

THE Federal Reserve's independence is a topic of heated discussion today, based in part on a Congressional effort to audit the Fed, a measure being pushed by Ron Paul. Ron Paul doesn't much care for the Federal Reserve, or indeed for fiat money. He's a supporter of the gold standard; a curious passion in these times, given the extremely harmful effects the standard had on the global economy during the early years of the Great Depression. But Mr Paul has long given Ben Bernanke a hard time when the chairman comes to visit the Capitol. Only now it seems that he has others offering criticism alongside him.

 

Mr Paul is aiming for greater transparency at the Fed, as are his colleagues, but their goals are somewhat different. Most lawmakers are concerned by the outsized role the central bank has played in supporting the financial system during the crisis, offering unprecedented access to funding to banks and near-banks. These concerns are often valid—many economists would like to know how the Fed will unwind many of these programmes (here's part of the answer)—and are occasionally silly, but they're generally of a different character altogether from Mr Paul's complaints:

 

"Mr. Paul sees transparency as a first step in making the public more aware of the Fed’s ability to electronically print money to support the banking system. The revelations from an audit will “expose to the American people exactly how the Federal Reserve operates,” he says. “Because when they fully understand how they operate, what they do, how they manipulate monetary policy and interest rates, they will finally figure out that it’s the Fed that has caused all the mischief.”

 

As it has always been for him, it's about the conduct of monetary policy itself. Eliminating this role for the Fed (or the Fed itself) is not a goal that's likely to gain much traction among other legislators or the public as a whole, but the broaching of the subject could lead to perceptions among market participants that the Fed's independence is compromised. Mr Bernanke said as much in testimony:

 

The Congress, however, purposefully–and for good reason–excluded from the scope of potential GAO reviews some highly sensitive areas, notably monetary policy deliberations and operations, including open market and discount window operations. In doing so, the Congress carefully balanced the need for public accountability with the strong public policy benefits that flow from maintaining an appropriate degree of independence for the central bank in the making and execution of monetary policy. Financial markets, in particular, likely would see a grant of review authority in these areas to the GAO as a serious weakening of monetary policy independence. Because GAO reviews may be initiated at the request of members of Congress, reviews or the threat of reviews in these areas could be seen as efforts to try to influence monetary policy decisions. A perceived loss of monetary policy independence could raise fears about future inflation, leading to higher long-term interest rates and reduced economic and financial stability. We will continue to work with the Congress to provide the information it needs to oversee our activities effectively, yet in a way that does not compromise monetary policy independence.

 

Central bank independence is actually pretty important (read Megan McArdle for a few good reasons why), though as Matt Yglesias notes, it's not a matter of black or white—the Fed is independent only to a certain extent and moreso at other times than others. Monetary policy making is about constantly re-establishing credibility through transparency, rigor, and occasional blunt demonstrations of will.

 

Importantly, whenever market confidence in independence erodes inflation expectations may come "unanchored", and it's much more difficult for a monetary authority to re-anchor those expectations than it is to simply maintain well-anchored expectations. Now you may say that there's far too much room in all of this for meddling around and generating bad outcomes, and you wouldn't be wrong. This system is merely the worst apart from all the others.

 

But the question of politicisation combined with the need for oversight of a highly involved Fed does raise some questions about the push to make the central bank the primary systemic regulator. The more it puts on its portfolio, the more legislators—justifiably—will want to know about it. But that level of involvement may prove troublesome for a central bank that will occasionally need to make some very unpopular decisions. Good government may well require separating the two functions, even if there is otherwise a natural overlap.

Edited August 8, 2012 by Phailadelphia

[seanbrock 1,684]

The problem with congress auditing the fed is the the most powerful congressmen are already in bed with the Fed and the banks and corporations. It really wouldn't do anything.

[Favre4Ever+ 4,476]

The free market hasn't existed for a long time. Through The Fed, the federal government is able to completely control the US economy. Who wins, who loses. The banks control this country, led by the Fed.

 

They raise and lower interest rates at a whim, destroy the buying power of the American people, and then print money whenever they so please.

 

Yes, you have winners in losers in a free market as well.. but they aren't hand picked by the federal government. No business should be too big to fail... But the same banks that are making all of these poor decisions are the same ones getting bailed out by the people they are fucking over. What a vicious and sick sick cycle.

 

The poor rise up against the middle class, while the rich steal millions, billions, and trillions of dollars while the feds help them taxing the shit out of small and average sized business owners that just so happen to be seen as competition.

 

Not sure how any of that is especially positive.

 

I mean.. Phail said it himself. The Fed was created to bail out massive businesses. What the fuck. lol

 

No. Just no.

 

The Fed doesn't just need to be audited. It needs to be blown off the map.

[seanbrock 1,684]

We've seen the results of a free market economy. The vast majority of everyone would be completely fucked in the ass, more so than we are now. If you want a free market ecnomy so bad why don't you go work in a factory in Guatemala for 90 hours a week in the worst conditions imaginable. That's an exaggeration but if it were truly a totally unregulated, free market economy, we'd see the poverty level sky rocket and the rich just get exorbitantly more wealthy. If nobody is watching and protecting the sheep, who's to stop the wolves from eating them?

 

I realize that what we have now is doing the same thing but it's not doing it as fast as a free market economy would. I think we should try to come up with new ideas instead of recycling old ideas that clearly do not work.

[Guest Phailadelphia]

Oh boy.

 

The free market hasn't existed for a long time. Through The Fed, the federal government is able to completely control the US economy. Who wins, who loses. The banks control this country, led by the Fed.

 

The Federal government doesn't control the economy. Anyone is free to enter or leave it and everyone is free to participate in it (or not). That's a free market economy.

 

They raise and lower interest rates at a whim, destroy the buying power of the American people, and then print money whenever they so please.

 

On a whim? The Fed has followed the Taylor Rules since the Humphrey-Hawkins act in the '80s and has kept both inflation and price levels very stable. Where's the evidence they're destroying buying power or simply printing money whenever they so please?

 

Yes, you have winners in losers in a free market as well.. but they aren't hand picked by the federal government. No business should be too big to fail... But the same banks that are making all of these poor decisions are the same ones getting bailed out by the people they are fucking over. What a vicious and sick sick cycle.

 

I agree with the latter half of this. Banks knowing they'll be bailed out in financial crises is a serious moral hazard regarding their choices.

 

The poor rise up against the middle class, while the rich steal millions, billions, and trillions of dollars while the feds help them taxing the shit out of small and average sized business owners that just so happen to be seen as competition.

 

¿Que?

 

Not sure how any of that is especially positive.

 

I mean.. Phail said it himself. The Fed was created to bail out massive businesses. What the fuck. lol

 

No. Just no.

 

The Fed doesn't just need to be audited. It needs to be blown off the map.

 

"Blowing [the Fed] off the map" would be economic suicide. Yes, it bails out big banks when they destroy the economy but those are LOANS, not free money. The Fed was created with the initial mandate as "a lender of last resort" (to banks) in times of financial panics. It's management of interest rates, excess reserves, and other monetary policy tools are key for macroeconomic stability and one of the key reasons the dollar has been the most dominant global currency since the 1950s. You won't find a stable, developed economy without a central banking institution for a reason.

[Favre4Ever+ 4,476]

We've seen the results of a free market economy. The vast majority of everyone would be completely fucked in the ass, more so than we are now. If you want a free market ecnomy so bad why don't you go work in a factory in Guatemala for 90 hours a week in the worst conditions imaginable. That's an exaggeration but if it were truly a totally unregulated, free market economy, we'd see the poverty level sky rocket and the rich just get exorbitantly more wealthy. If nobody is watching and protecting the sheep, who's to stop the wolves from eating them?

 

I realize that what we have now is doing the same thing but it's not doing it as fast as a free market economy would. I think we should try to come up with new ideas instead of recycling old ideas that clearly do not work.

 

You think somebody is protecting the sheep right now? The ignorance comes in thinking that the Federal Gov. is actually helping and protecting those of us that need the help most. They clearly are not. Wolves roam in packs, and nobody is stopping them from ripping the sheep limb from limb.

 

The question is how do we go about breaking Pareto's Rule? How do we get the rich to actively spend more of their money?

 

Maybe the bigger question... Is the federal government interested in a redistribution of wealth?

 

Nahhh.

[seanbrock 1,684]

 

"Blowing [the Fed] off the map" would be economic suicide. Yes, it bails out big banks when they destroy the economy but those are LOANS, not free money. The Fed was created with the initial mandate as "a lender of last resort" (to banks) in times of financial panics. It's management of interest rates, excess reserves, and other monetary policy tools are key for macroeconomic stability and one of the key reasons the dollar has been the most dominant global currency since the 1950s. You won't find a stable, developed economy without a central banking institution for a reason.

Loans that they don't have to pay any interest on. The banks are slightly less forgiving when it comes to the people who they've been robbing blind for the past 30 years.

 

I think maybe the Fed shouldn't be abolished but changes definitely need to be made. First of all, Ben Bernanke and Alan Greenspan should both have been hung for treason long ago. They fed this country to the wolves, they KNEW it and they fed us lie upon lie upon lie, HOWEVER I don't trust the ruling class (The guys with 7+ figures in their bank accounts) to not completely and totally gut everyone else with no restrictions or limits on them and I don't trust congress and really I don't trust the fed either.

 

We need new ideas. We need progression. Not regression. Simply ending the fed and going to a free market economy is devolving. It's going back to a system that had us living in shanty towns. The current system doesn't work either though, so lets try something new.

[seanbrock 1,684]

You think somebody is protecting the sheep right now? The ignorance comes in thinking that the Federal Gov. is actually helping and protecting those of us that need the help most. They clearly are not. Wolves roam in packs, and nobody is stopping them from ripping the sheep limb from limb.

 

The question is how do we go about breaking Pareto's Rule? How do we get the rich to actively spend more of their money?

 

Maybe the bigger question... Is the federal government interested in a redistribution of wealth?

 

Nahhh.

I agree with everything you just said, but going to a free market economy will only make things far far worse.

[Favre4Ever+ 4,476]

The Federal government doesn't control the economy. Anyone is free to enter or leave it and everyone is free to participate in it (or not). That's a free market economy.

 

Free markets rely on supply and demand setting prices, not entities.

 

 

On a whim? The Fed has followed the Taylor Rules since the Humphrey-Hawkins act in the '80s and has kept both inflation and price levels very stable. Where's the evidence they're destroying buying power or simply printing money whenever they so please?

 

The central bank extends cheap to free credit, taking enormous risks in the process. These dangerous decisions create an artificial influx in currency, which then lead to lower interest rates. Now, you are saying lower interest rates...AWESOME.

 

But when those rates are based on something not real, something completely fabricated.... You are entering DANGEROUS territory.

 

Businesses then commence on projects that require a lot of cash because they are expecting a significant amount of resources and for the consumer base to be stable for a length of time. The problem is that those resources aren't truly there in the numbers everyone thinks... S

 

Housing boom.

 

Cheap credit for everyone led business owners to believe that there was more money out there than actually existed. Houses begin going up like crazy... Turns out that the money you see on the computer and the money you actually have in your account don't actually equal what is being saved. Thus... Millions upon millions of unfinished housing developments around the country.

 

"Blowing [the Fed] off the map" would be economic suicide. Yes, it bails out big banks when they destroy the economy but those are LOANS, not free money. The Fed was created with the initial mandate as "a lender of last resort" (to banks) in times of financial panics. It's management of interest rates, excess reserves, and other monetary policy tools are key for macroeconomic stability and one of the key reasons the dollar has been the most dominant global currency since the 1950s. You won't find a stable, developed economy without a central banking institution for a reason.

 

Where does the Fed get that money? What happens to it when it "gets paid back"?

 

I don't recall if it was this thread or the Paul Ryan thread where you posted an artical bashing him for wanting to go after inflation... Which, I concur with. I think it's kind of absurd to be so obsessed with inflation.. But you have to realize that the Fed already does that. As Ryan wants, they are completely focused on the interest rates...

 

That's dumb. Not sure why they don't go directly after the economy instead.

 

If they don't worry so much about ensuring that "interest rate stability" you are bantering about, they could be targeting the GDP directly and ensuring a constant growth.

 

They could also work harder towards a full employment rate. Who cares if the interest rate rises slightly if it means we are near or moving towards free employment?

 

And management of excess reserves? Isn't there like a trillion dollars in excess right now because the interest rate is so god damn high? The percentage the Fed pays as far as interest goes on deposits is nearly DOUBLE what banks can make on loans to small business.

 

Where's the incentive to loan money? Make the banks WORK to make their big dollars.

 

We also need to work on stabilizing the exchange rates, which the Fed has the power to do but refuses.

[Favre4Ever+ 4,476]

I agree with everything you just said, but going to a free market economy will only make things far far worse.

 

I just lean towards the free market side of the spectrum.

 

On one end you have the free market and on the other you have this fiat money bank controlled hell. I don't want to be solely dependent on either.

 

We need to find a happy medium, but as I said, I do lean free market as far as ideals and principles are concerned.