Sanders Amendment To Financial Reform Bill Passes Easily

An amendment to increase the transparency through which the Federal Reserve (Fed) operates passed on Tuesday by a vote of 96-0.

The measure, sponsored by Sen. Bernie Sanders (I-Vt.), would require the Government Accountability Office (GAO) to conduct a one-time audit of the powerful central banking agency, going back to December 1, 2007. At a press conference with reporters immediately following the vote, Sanders praised his colleagues for their unanimous support.

"What just transpired is an historic vote for the American people in terms of finally bringing transparency to what is perhaps the most powerful federal agency, and that is the Fed," he said.

A similar amendment that would've required the GAO to conduct a far more wide-ranging audit, and would've made such audits recurring, failed by a vote of 62-37. The measure was the product of Sanders's initial, less watered-down effort to shine more light on the Fed, mirrored after a proposal put forth by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.) that passed the House last year.

After Sanders modified his amendment, Sen. David Vitter (R-La.) re-introduced the original version.

Sanders Defends Amendment To Audit The Fed

Sen. Bernie Sanders (I-Vt.) insisted on Friday that his amendment within a Senate financial regulatory reform bill to audit the Federal Reserve (Fed) would not grant Congress the authority to set monetary policy.

“That was not my intent,” Sanders said to reporters.

Sanders’s effort received a huge boost last night when he was able to strike a deal on the amendment with Senate Banking Committee Chairman Chris Dodd (D-Conn.) Under the agreement, the Government Accountability Office (GAO) would be authorized to perform a full audit of the Fed, going back to December 1, 2007. If the bill is signed into law, the GAO would be required to publish its findings online no later than one year after the law is enacted.

Most analysts say the amendment is not too radical of an idea. Sanders, on Friday, said it’s really just a matter of bringing about common-sense transparency to the financial system.

“The American people have a right to know what [Fed Chairman] Ben Bernanke has refused to allow them to know,” said Sanders, who admitted that the Chairman “is not one of my best friends.”

Indeed, the powerful banking agency along with firms on Wall Street are aggressively pushing back on the provision. Earlier this week, Bernanke wrote a letter to Dodd urging him to strip the amendment from the bill. But with Dodd -- the bill’s author -- as well as conservative South Carolina Republican Jim DeMint both saying they support Sanders, the measure looks like a safe bet to end up in the final Senate bill. Now, the question becomes whether or not it will survive a potential conference committee.

“Some of [the House bill’s] language is stronger that what we have, some of our language is stronger than what they have,” said Sanders, adding that the only thing on his mind right now is getting the 60 votes necessary to move forward on the legislation.

Bernanke Warns Large Deficits Could Unhinge U.S. Economy

Although consumer spending in some areas including auto sales are up so far this year, the U.S. should be very concerned about rising deficits, said Federal Reserve (Fed) Chairman Ben Bernanke on Wednesday.

Without a curb in government spending, the nation could experience unsustainable deficits in the range of four-to-nine percent of Gross Domestic Product (GDP) by 2020, Bernanke warned during a hearing before the Joint Economic Committee. Though the job market should rebound slightly in the coming years, Congress must find ways to address the debt level, he said.

"Although sizeable deficits are unavoidable in the near term, maintaining the confidence of the public and financial markets requires that policymakers move decisively to set the federal budget on a trajectory toward sustainable fiscal balance."

While he reminded the committee that home sales for 2010 are not where they need to be, Bernanke said that given recent gains in both GDP growth and hiring in sectors such as manufacturing, it is evident that recovery is underway, and will continue modestly going forward. When asked how such projections will affect interest rates, which have been kept at historically low levels for several months, Bernanke said that would depend on a number of things.

"At some point, the markets will make a judgment...[about] our political will to achieve longer-term sustainability," Bernanke told Sen. Sam Brownback (R-Kan.). "At that point interest rates could go up and that would be, of course, a negative for economic growth and recovery. We don't know when that point would be reached."

Despite low levels of lending, the Fed, said Bernanke, is encouraging banks to continue building up capital. Acknowledging that "sluggish" loan demand coupled with conservative lending has impacted businesses looking to receive credit, Bernanke said he is hopeful that the Fed's bank supervision won't "impede sound lending," or get in the way of banks finding a suitable balance between lending and liquidity.

Bernanke was peppered with questions about a financial regulatory reform bill making its way through the Senate. Specifically, Bernanke was asked to judge the proposed Consumer Financial Protection Agency (CFPA), a key pillar of reform, that would act as a watchdog for individual consumers, and would likely be housed inside the Fed.

"I understand why people would be concerned [over its location]," Bernanke said, adding that there are a few items within the legislation that must be clarified before he can offer a more detailed analysis. For example, the question of how the CFPA would be funded must be answered by Congress, he said.

Rep. Barney Frank Optimistic Over State Of U.S. Economy

By Meagan Wiseley - University of New Mexico/Talk Radio News Service

Chairman of the House Financial Services Committee Barney Frank (D-Mass.) said Friday that on the economic front, America received good news and bad news today following the Labor Department's announcement of a 10.2% unemployment rate.

“Although 190,000 more American’s lost their jobs...that is substantially less than the pace at which they were losing jobs until fairly recently,” Frank said during remarks at a conference sponsored by NoLimits.org, a progressive on-line organization founded by Frank's sister.

Frank said the American Recovery and Reinvestment Act, or the stimulus bill, had a positive impact in deterring unemployment, explaining that unemployment rates would be higher if the stimulus bill hadn’t passed.

Frank also said that the lack of regulation in the financial sector, which he contributed to Alan Greenspan, the former Chairman of the Federal Reserve, led to the AIG crisis and the following recession. He praised the current Chairman of the Federal Reserve Ben Bernanke for his willingness to collaborate with Congress over new financial regulatory reforms.

Frank remained positive about the economic outlook.

“We are making progress ... things are getting better virtually on every front [and] I am confident that when we are through with financial regulations...the kind of things that got us in trouble in the past won’t get us in trouble in the future,” Frank added.

More Oversight Necessary To Protect Consumers Says Bernanke

Federal Reserve Chairman Ben Bernanke wants Congress to make it less profitable for financial firms to collapse. On Thursday, he explained to members of the House Financial Services Committee that they should look into removing incentives for firms to become “too big to fail.”

"One of the big concerns about these large firms [is] they are not subject to the discipline of the market because lenders do not believe that this firm will be allowed to fail. That has to be eliminated and fixed... I would not be satisfied with any resolution authority that did not have a strong presumption and a strong mechanism for allowing these firms, when being taken over by the government, to impose significant losses on not only shareholders but also creditors,” Bernanke said, referring to his support of a new consumer protection agency proposed by the Obama administration.

In addition to the creation of an oversight council, or “resolution regime,” comprised of various financial agency and department representatives, to “monitor and identify emerging systemic risks across the full range of financial institutions and markets,” Bernanke’s suggestions for financial reform also included allowing Congress to grant federal agencies the power to respond to risks posed by firms under their scope.

After proposing tighter regulatory measures for large firms, such as Lehman Brothers, Bernanke advised the committee to consider stricter regulatory lending policies for Fannie Mae and Freddie Mac, as well as the Federal Housing Administration.

"I think in the near future we need to have a plan for Fannie and Freddie...I think the GSEs do need to be addressed in the near term, not just for systemic risk reasons, but because there's a lot of uncertainty in housing and what's going to happen to the housing structure, housing finance system. So I hope that in the very near future, I believe that's the intention, I hope in the very near future we'll have some proposals on that," he said.

When asked by Rep. Jeb Hansarling (R-Texas), the committee's top Republican, whether or not the current administration’s proposed agency would negatively impact the job sector, Bernanke replied, “It depends,” adding later that only an overreaction - in the form of too much regulation - on the part of Congress would threaten the jobs market.