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.

House Committee Questions Fed Member On Fed’s Expansion

By Learned Foote- Talk Radio News Service

On Thursday, the House Financial Services Committee questioned Federal Reserve Board Vice Chairman Donald Kohn regarding a proposal recently advanced by the Obama administration that would expand the powers of the Fed.

The Fed currently oversees monetary policy, and in 1977 Congress established that the agency's objectives are to maximize employment and stabilize prices.

The expanded powers would grant the Fed the authority to oversee systemic risks to the financial system as a whole. Said Kohn, “the job of the systemic risk regulator would be to take account of those interrelationships, the markets and how they’re developing, and the institutions and how they fit into the markets, and look at the overall risk to the system, as well as the risk of the individual institution.”

He added that the Federal Reserve could fulfill this role.

Some Congressmen argued that the expanded powers could compromise the Fed’s responsibilities regarding monetary policy.

Rep. Spencer Bachus (R-Ala.) said that the House Republicans’ view of the Federal Reserve dramatically differed from that of the administration. “Republicans believe that the Fed’s core mission, and I stress this, is to conduct monetary policy, and that that will be seriously undermined if its supervisory responsibilities are dramatically expanded.” He suggested that the Fed could become a “permanent bail-out agency,” and its political independence could be compromised.

“We need to end the bailouts that the Fed I think has been instrumental in carrying out over the last eighteen months, and I mean the ad hoc bailouts of individual institutions.”

Kohn said “we do not believe that enhancements to our existing supervisory and regulatory authority proposed by the administration would undermine our ability to pursue our monetary policy objectives effectively and independently.”

Rep. Ron Paul (R-Texas), who has introduced a bill in the House to audit the Fed more thoroughly, expressed skepticism as to whether the Fed’s powers should be expanded. He said that the Fed needs to be more transparent, although Kohn argued that “our independence in the conduct of monetary policy is accompanied by substantial accountability and transparency.”

Congressman Al Green (D-Texas) asked the Vice Chairman how he would respond to those who argue that it is “risky to give the Fed this much power.” Kohn replied that the additional powers are “incremental...not a huge increase in our authority.” He emphasized that “for the authority we already have, we are held accountable.”

Ron Paul Calls For The Federal Reserve To Increase Transparency

By Learned Foote- Talk Radio News Service

Congressman Ron Paul (R-Texas) recently introduced the Federal Reserve Transparency Act to House, a piece of legislation that calls for a stronger audit of the Federal Reserve along with a "detailed report to Congress.” The bill currently has 241 co-sponsors.

During a forum at the Cato Institute, Paul said he originally decided to run for Congress in the 1970s due to his interest in monetary policy, which is conducted by the Federal Reserve. “I’ve been talking about it for decades, and arguing that we had a financial system that was very fryable, very vulnerable, and it was the Fed that was creating the bubbles. Therefore we should be looking into it and preventing these problems rather than waiting for cataclysmic financial crisis to hit.”

Gilbert Schwartz, Former Associate General Counsel to the Federal Reserve, appeared alongside Paul, argued that the Fed is responsible for the financial crisis to some degree, he praised the “flexibility that the Federal Reserve exhibited in terms of their willingness to make sure that the economy—not just the U.S. economy, but also the world financial system—did not collapse.”

Schwartz went on to explain that the Fed understands the growing demand for transparency. He cited recent financial statements released by the Fed, saying, “clearly the message is getting to the Fed, and... this indicates at least some degree of attempt by the Fed to: one, be responsive to that criticism, and number two, probably to thwart the legislation that would otherwise subject them to GAO [U.S. Government Accountability Office] audit.”

Paul said that his bill will “open the books,” but not necessarily affect monetary policy. “It’s less confrontational for those who want to design regulations and deal with with monetary policy, and I think that’s why we’re getting such bipartisan support.” Paul believes, however, that if the audit is conducted, public opinion will turn against the Fed and monetary policy will be substantially challenged.

Ron Paul attributed the bills' support to the changing landscape of the economic system. “It had to do with the TARP funds,” Paul explained. “There are a few spammers out there that are interested in what I’ve been doing, and they’re letting their Congressmen know."