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Is the Fed Arguing in Bad Faith?
TND Guest Contributor: Paul-Martin Foss |
Two recurring arguments come to the fore whenever anyone from the Federal Reserve argues against auditing the Fed. The recent flurry of comments from Fed officials have been no different. The first argument is that Audit the Fed will result in Congress being able to look over the Fed’s shoulder in real time. The second is that Audit the Fed will result in Congress dictating monetary policy. Neither of those arguments holds water.
The first time Audit the Fed passed the House of Representatives, it was as an amendment to H.R. 3996, which was then rolled into H.R. 4173, the first version of the bill that eventually became the Dodd-Frank Act. The language of Audit the Fed was modified to conform to the concerns expressed by Chairman Bernanke.
With respect to the Fed’s concerns that Audit the Fed would allow an audit in real-time, language was inserted to read:
Audits of the Federal Reserve Board and Federal reserve banks shall not include unreleased transcripts or minutes of meetings of the Board of Governors or of the Federal Open Market Committee. To the extent that an audit deals with individual market actions, records related to such actions shall only be released by the Comptroller General after 180 days have elapsed following the effective date of such actions.
Surely if the Fed is concerned about Congress looking over its shoulder, it shouldn’t have a problem with a six-month lag for its actions to be auditable, should it? Just imagine what would happen if Greece were to exit the euro, the Eurozone were to go to hell in a handbasket, and the Fed were to re-engage its swap lines with the ECB. Would it really be so onerous if, six months after that were completed, Congress were to take a look at those actions and see what actually happened? Because as it stands right now, GAO is legally prohibited from doing that.
With respect to the concerns about Congress dictating monetary policy, the modified language of the Paul-Grayson Audit the Fed amendment inserted language stating that:
Nothing in this subsection shall be construed… as interference in or dictation of monetary policy to the Federal Reserve System by the Congress or the Government Accoutability Office…
That right there makes it pretty clear that the authors of Audit the Fed have no interest in dictating monetary policy or in having GAO do so either. Assertions to the contrary by certain Fed officials have no basis in fact.
Let’s not forget that Congress already sets the parameters of monetary policy through the dual mandate that was established over 35 years ago. And if Congress wanted to, it could minutely dictate monetary policy. That, however, would require legislative action to override the Fed’s power, something which is not found in Audit the Fed. Those Fed officials claiming that Audit the Fed would give Congress the power to dictate monetary policy know that, yet continue to make these unsubstantiated allegations.
Let’s not forget either that Congress has broad subpoena power. If a Congressional committee wanted, it could subpoena the Fed for any monetary policy-related records it wanted to see. But a subpoena is a nuclear option, something only resorted to when everything else has failed. Audit the Fed is a middle ground between the status quo, in which Congress and GAO can’t get any information, and a subpoena in which Congress could ask for everything. If the Fed continues to dig in its heels and remain opaque, it shouldn’t be surprised to find itself facing that nuclear option at some point down the road.
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About Paul-Martin Foss:
Paul-Martin Foss is the founder, President, and Executive Director of the Carl Menger Center for the Study of Money and Banking, an Arlington, VA-based think tank dedicated to educating the American people on the importance of sound money and sound banking.
Prior to founding the Menger Center, Mr. Foss worked in the U.S. House of Representatives for seven years, including six years as Congressman Ron Paul’s legislative assistant for monetary policy and financial services, and one year as Deputy Legislative Director for Congressman Thomas Massie.
As Congressman Paul’s legislative assistant, he assisted the Congressman in his duties as Chairman of the Subcommittee on Domestic Monetary Policy by helping to develop hearing topics, agendas, and briefing Congressmen and their staffs on monetary policy topics. Mr. Foss also was responsible for the management of Dr. Paul’s monetary policy and financial services legislation, including the “Audit the Fed” and “End the Fed” bills, and was co-editor of Ron Paul’s Monetary Policy Anthology, a multi-thousand page compilation of hearing transcripts, lecture transcripts, and other documents related to Dr. Paul’s chairmanship.
Mr. Foss received his Bachelor’s degree from The University of the South (Sewanee), and Master’s degrees from the London School of Economics and Georgetown University’s Edmund A. Walsh School of Foreign Service.
This article appeared on the Carl Menger Center for the Study of Money and Banking and is reprinted with permission, “Creative Commons 4.0.”
Source: http://thenewsdoctors.com/is-the-fed-arguing-in-bad-faith/
