Audit the Fed Amendment Passes 43-26!

By Tmartin

After several hours of heated debate, the Paul-Grayson “Audit the Fed” amendment passed 43-26 in the House Financial Services Committee earlier today. The amendment calls for a comprehensive audit of the Federal Reserve and replaces the opposing “placebo” amendment proposed by Mel Watt.

The Paul-Grayson initiative is an amendment to Barney Frank’s HR 3996, also known as the “Financial Stability Improvement Act of 2009″. The Committee was going to vote on that bill today, but Barney Frank surprisingly postponed the vote until after the Thanksgiving recess:

(Rep. Barney) Frank told the panel that most of the members pushing him to postpone the vote were members of the Congressional Black Caucus who said that the political environment wasn’t right for a vote this afternoon.

“It’s my understanding,” Frank said, “that the issues being addressed are not internal to this bill.” In other words, the Democrats were not expressing particular problems with the bill itself, but the larger problems in the economy made them reluctant to support a bill that could be portrayed as too friendly to Wall Street.

Ron Paul sent out the following press release shortly after the amendment passed:

FOR IMMEDIATE RELEASE

Washington, D.C. – Congressman Ron Paul (TX-14) is pleased to announce that his and Congressman Grayson’s amendment based on HR 1207 has passed in the Financial Services Committee by a vote of 43-26 and will be included in major banking reform legislation.

The Paul/Grayson amendment:

• Removes the blanket restrictions on GAO audits of the Fed
• Allows audit of every item on the Fed’s balance sheet, all credit facilities, all securities purchase programs, etc.
• Retains limited audit exemption on unreleased transcripts and minutes
• Sets 180-day time lag before details of Fed’s market actions may be released
• States that nothing in the amendment shall be construed as interference in or dictation of monetary policy by Congress or the GAO

“While HR 3996, if passed, will grant sweeping new powers to the Federal Reserve, at least with this amendment attached, it won’t be acting in secret anymore. This is a major victory for Federal Reserve transparency and government accountability,” stated Congressman Paul.

How they voted (HR 1207 co-sponsors in bold):

Democrats
MA-04	Rep. Barney Frank		nay
PA-11	Rep. Paul E. Kanjorski		nay
CA-35	Rep. Maxine Waters		nay
NY-14	Rep. Carolyn B. Maloney		nay
IL-04	Rep. Luis V. Gutierrez		nay
NY-12	Rep. Nydia M. Velázquez		nay
NC-12	Rep. Melvin L. Watt		nay
NY-05	Rep. Gary L. Ackerman		nay
CA-27	Rep. Brad Sherman	aye
NY-06	Rep. Gregory W. Meeks		nay
KS-03	Rep. Dennis Moore		nay
MA-08	Rep. Michael E. Capuano		nay
TX-15	Rep. Rubén Hinojosa	aye
MO-01	Rep. William Lacy Clay	aye
NY-04	Rep. Carolyn McCarthy		nay
CA-43	Rep. Joe Baca
MA-09	Rep. Stephen F. Lynch		nay
CA-42	Rep. Gary G. Miller		nay
GA-13	Rep. David Scott	aye
TX-09	Rep. Al Green		nay
MO-05	Rep. Emanuel Cleaver		nay
IL-08	Rep. Melissa L. Bean		nay
WI-04	Rep. Gwen Moore		nay
NH-02	Rep. Paul W. Hodes	aye
MN-05	Rep. Keith Ellison		nay
FL-22	Rep. Ron Klein		nay
OH-06	Rep. Charles Wilson		nay
CO-07	Rep. Ed Perlmutter	aye
IN-02	Rep. Joe Donnelly		nay
IL-14	Rep. Bill Foster		nay
IN-07	Rep. Andre Carson		nay
CA-12	Rep. Jackie Speier	aye
MS-01	Rep. Travis Childers	aye
ID-01	Rep. Walt Minnick	aye
NJ-03	Rep. John Adler	aye
OH-15	Rep. Mary Jo Kilroy		nay
OH-01	Rep. Steve Driehaus	aye
FL-24	Rep. Suzanne Kosmas	aye
FL-08	Rep. Alan Grayson	aye
CT-04	Rep. Jim Himes		nay
MI-09	Rep. Gary Peters	aye
NY-25	Rep. Dan Maffei	aye
Republicans
AL-06	Rep. Spencer Bachus	aye
TX-19	Rep. Randy Neugebauer	aye
DE-01	Rep. Michael N. Castle	aye
NY-03	Rep. Peter King	aye
CA-40	Rep. Edward R. Royce	aye
OK-03	Rep. Frank D. Lucas	aye
TX-14	Rep. Ron Paul (sponsor)	aye
IL-16	Rep. Donald A. Manzullo	aye
NC-03	Rep. Walter B. Jones	aye
IL-13	Rep. Judy Biggert	aye
NC-13	Rep. Brad Miller
WV-02	Rep. Shelley Moore Capito	aye
TX-05	Rep. Jeb Hensarling	aye
NJ-05	Rep. Scott Garrett	aye
SC-03	Rep. J. Gresham Barrett	aye
PA-06	Rep. Jim Gerlach	aye
GA-06	Rep. Tom Price	aye
NC-10	Rep. Patrick T. McHenry	aye
CA-48	Rep. John Campbell	aye
FL-12	Rep. Adam Putnam	aye
MN-06	Rep. Michele Bachmann	aye
TX-24	Rep. Kenny Marchant	aye
MI-11	Rep. Thaddeus McCotter	aye
CA-22	Rep. Kevin McCarthy	aye
FL-15	Rep. Bill Posey	aye
KS-02	Rep. Lynn Jenkins	aye
NY-26	Rep. Christopher Lee	aye
MN-03	Rep. Erik Paulsen	aye
NJ-07	Rep. Leonard Lance	aye

FED Appeals Court Order to Identify Banks Receiving Loans

Image by r0b0r0b via Flickr

Bloomberg reports the Federal Reserve is appealing a judge’s order requiring the central bank to identify the financial institutions that benefited from its emergency loans, according to a lawyer representing Bloomberg LP.

The central bank refused to divulge details about the companies participating in its 10 remaining lending programs, saying that doing so might set off a run by depositors. The Fed had until today to seek a reversal of the Aug. 24 decision by Manhattan Chief U.S. District Judge Loretta Preska, who ruled the Fed must release the identities, as well as disclose loan amounts and the assets put up as collateral.

Bloomberg LP, the New York-based company majority-owned by Mayor Michael Bloomberg, filed suit against the Fed on Nov. 7 on behalf of its Bloomberg News unit. Scott Rose, a lawyer with New York-based Willkie Farr & Gallagher LLP, who represents Bloomberg, said the appeal is being filed with the U.S. Court of Appeals in New York. The filing couldn’t be immediately confirmed in court records.

75% of Americans Support Auditing the Federal Reserve

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Barney Frank who chairs the Financial Service Committee better think twice about watering down Ron Paul's bill. There's talk he intends to morph it into a broader bill which would weaken or defeat Paul's bill all together.

American Banking News reports,
Congressman Ron Paul informed the Campaign for Liberty that the House Financial Services Committee will hold hearings on Paul’s bill to audit the Federal Reserve (H.R. 1207). The hearings are currently tentatively set for Friday, September 25^th at 9:00 AM.

H.R. 1207: the Federal Reserve Transparency Act of 2009 would require the Government Account Office to audit the Federal Reserve’s funding facilities, including the Primary Dealer Credit Facility, Term Securities Lending Facility, and Term Asset-Backed Securities Lending Facility. The GAO would then provide a full report of its findings to Congress. Paul believes that the legislation will shine light on the Federal Reserve’s secrecy and demonstrate to the country that the Federal Reserve doesn’t have the country’s best interest in mind.

Currently H.R. 1207 has 284 cosponsors in the House of Representatives and a similar piece of legislation, S.604: the Federal Reserve Sunshine Act has 24 co-sponsors in the senate. A recent opinion poll indicated that 75% of the American People support the idea of auditing the Federal Reserve.

John Tate, president of the Campaign for Liberty, stated in a press release, ”The Federal Reserve wields tremendous power and is at the center of our current economic storm of deficits, debt and bailouts. Congressman Barney Frank should be commended for his willingness to hold hearings on Fed transparency.”

Now that the legislation is gaining steam, some Libertarian activists are worried that the legislation will be attached to a larger financial regulatory reform bill that will provide increased power to the Federal Reserve or other agencies. Tate stated that attaching the bill to other legislation “would be a betrayal to the intent and spirit of H.R. 1207, and would be vigorously opposed by Campaign for Liberty.”

Misinformation Alert: Barney Frank Never Said That HR 1207 Will Pass In October

Missing Sentence in Transcript Causes Premature HR 1207 Victory Celebration

Several blogs and forums reported that Chairman of the House Financial Services Committee, Barney Frank, said that Ron Paul’s bill to audit the Federal Reserve, HR 1207, will pass in October.

Incorrect Reports about Barney Frank’s Statement on HR 1207

• Washington Times: Barney Frank says Ron Paul bill will pass
• Politico: Barney: Fed audit bill will pass in October
• Business Insider: Barney Frank: Yes, We Will Pass Ron Paul’s “Audit The Fed” Bill
• United Liberty: Frank: Vote on HR 1207 in October
• Daily Paul: Video: Barney Frank Says House Will Pass HR1207 in October
• ZeroHedge: Barney Frank Says The House Will Pass HR 1207 In October
• Mish: Barney Frank Says Ron Paul’s Audit The Fed Bill Will Pass In October – (Update posted)
• Washington Independent: Ron Paul’s ‘Audit the Fed’ Bill to Get October Vote?

The source of the rumor seems to be the following video.

A sloppy and incomplete transcript, which appears to have originated at the Washington Times which was originally prepared by Mish and then copied by the Washington Times, is making the rounds. The transcript is missing an essential sentence, which is marked in bold:

Barney Frank: “I have been pushing for more openness from the Fed. I want to restrict the powers of the Federal Reserve. First of all, the Fed will be the major losers of power if we are successful, as I believe we will be, setting up a financial product protection commission. The Federal Reserve is now charged with protecting consumers. They were supposed to do subprime mortgage restrictions.

Congress in 1994 gave the Fed powers to ban subprime mortgages. Alan Greenspan refused to do it. They had the power to ban credit card abuses. Under Greenspan they did nothing. Under Bernanke they started but only after Congress acted.That’s one of the reasons why in the new consumer protection agency, we will take away from the Federal reserve the power to go consumer protection.

Secondly, they have has since 1932 a right under Herbert Hoover to intervene in the economy whenever they could. Last September, the Federal Reserve they were going to advance $82 billion to AIG. I was kind of surprised and said, ‘Mr Bernanke do you have $82 billion?’ Mr. Bernanke replied, ‘I have $800 billion and under section 13.3 of the Federal Reserve Act they can lend anything they want.’

We are going to curtail that lending power. We are going to put some restrictions on it.

Finally we will subject them to a complete audit. I have been working with Ron Paul, who is the main sponsor of that bill. He agrees that we don’t want to have the audit appear as if it influences monetary policy as that would be inflationary.

One of the things the audit will show you is what the Federal Reserve buys itself. And that will be made public, but not instantly because if it was made instantly people would be trading off it, so the data would be released after a time period of several months, enough time so it will not be market sensitive. That will be part of the overall federal regulation that we are redacting. This will probably pass in October.”

(Accurate transcript here.)

With “This will probably pass in October”, Frank is referring not to HR 1207, but to his own financial regulation bill, which might or might not include some aspects of Ron Paul’s HR 1207. The preceding sentence, “That will be part of the overall federal regulation that we are redacting,” is for some reason missing from the widely distributed transcript, and has therefore been completely ignored by bloggers and commentators.

In recent weeks Ron Paul repeatedly warned against just this sort of thing happening: that HR 1207 might become part of a more comprehensive financial regulation bill and be watered down so that it appeases the angry masses without instituting any real changes. It would be an irony of history if that happened — if HR 1207 were watered down and integrated into an unconstitutional bill that Ron Paul would have to vote against.

What did Ron Paul really say?

It has become fashionable for the political elite to try to distort Ron Paul’s statements for political gain or even put entirely new words into his mouth. Just the other day, Treasury Secretary Tim Geithner said, “Even [Ron Paul] recognizes how important it is to us to have the Fed independent of politics.”

Now Barney Frank claims that “[Ron Paul] agrees that we don’t want to have the audit appear as if it influences monetary policy as that would be inflationary.”

Ron Paul never said that an audit of the Federal Reserve would be inflationary. In fact, he has credibly demonstrated the exact opposite: that the secretive Federal Reserve itself is responsible for inflation, with the dollar having lost 96% of its value since the Fed’s creation in 1913.

Here is what Ron Paul actually said about HR 1207, the bill to audit the Federal Reserve, and why only a real audit will protect the public’s interest.

Ron Paul: “Mr. Speaker, the big guns have lined up against HR 1207, the bill to audit the Federal Reserve. What is it that they are so concerned about? What information are they hiding from the American people? The screed is: transparency is okay except for those things they don’t want to be transparent.

Federal Reserve Chairman Ben Bernanke, argues that HR 1207, the legislation to audit the Federal Reserve, would politicize monetary policy. He claims that monetary policy must remain independent, that is; secret. He ignores history because chairmen of the Federal Reserve in the past, especially when up for reappointment, do their best to accommodate the president with politically driven low interest rates and a bubble economy.

Former Federal Reserve Board Chairman Arthur Burns, when asked about all the inflation he brought about in 1971 before Nixon’s reelection, said that the Fed has to do what the president wants it to do, or it would lose its independence. That about tells you everything.

Not by accident Chairman Burns strongly supported Nixon’s program of wage and price controls the same year, but I guess that’s not political. Is not making secret deals with the likes of Goldman Sachs, international financial institutions, foreign governments and foreign central banks politicizing monetary policy?

Bernanke argues that the knowledge that their discussions and decisions will one day be scrutinized will compromise the freedom of the Open Market Committee to pursue sound policy. If it is sound and honest and serves no special interest, what’s the problem?

He claims that HR 1207 would give power to Congress to affect monetary policy. He dreamt this up to instill fear, an old statist trick to justify government power. HR 1207 does nothing of the sort. He suggested that the day after an FOMC meeting, Congress could send in the GAO to demand an audit of everything said and done. This is hardly the case. The FOMC function under HR 1207 would not change.

The detailed transcripts of the FOMC meetings are released every 5 years, so why would this be so different and what is it that they don’t want the American people to know? Is there something about the transcripts that need to be kept secret, or are the transcripts actually not verbatim?

Fed sycophants argue that an audit would destroy the financial markets’ faith in the Fed. They say this in the midst of the greatest financial crisis in history brought on by none other than the Federal Reserve. In fact, Chairman Bernanke stated on November 14th 2007, “A considerable amount of evidence indicates that Central Bank transparency increases the effectiveness of monetary policy and enhances economic and financial performance”.

They also argue that an audit would hurt the value of the U.S. dollar. In fact, the Fed, in less than a 100 years of its existence, has reduced the value of the 1914 dollar by 96%.

They claim HR 1207 would raise interest rates. How could it? The Fed sets interest rates and the bill doesn’t interfere with monetary policy. Congress would have no say in the matter and besides, Congress likes low interest rates.

It is argued that the Fed wouldn’t be free to raise interest rates if they thought it necessary. But Bernanke has already assured the Congress that rates are going to stay low for the foreseeable future. And again, this bill does nothing to allow Congress to interfere with interest rate setting.

Fed supporters claim that they want to protect the public’s interest with their secrecy. But the banks and Wall Streets are the opponents of HR 1207, and the people are for it. Just who best represents the public’s interest?

The real question is: why are Wall Street and the Fed so hysterically opposed to HR 1207? Just what information are they so anxious to keep secret? Only an audit of the Federal Reserve will answer these questions.”

75% Want A Real Audit

We need to keep up the pressure to make sure that HR 1207 itself is put up for vote. 75% of the American people want a real audit of the Federal Reserve, not a pretend investigation that goes to great pains not to ruffle any feathers, claiming that too close a look at what the Wizard is doing behind the curtain would be “inflationary” (Frank) and “problematic for the country” (Geithner).