Barney Frank, Chairman of the House Financial Service Committee, announced that a Federal Reserve audit will be part of the Congress’s regulatory overhaul on the financial services industry.
In February of this year, Congressman Ron Paul introduced a piece of legislation which would provide the legislative framework for an audit of the Federal Reserve. Currently that piece of legislation (HR 1207) is sitting in the House Financial Services Committee and has 282 co-sponsors. In addition, there are two pieces of legislation in the Senate, “S. 604: Federal Reserve Sunshine Act of 2009” and “S. 513: Federal Reserve Transparency Act” with similar goals.
The purpose of the legislation, according to Paul’s website, is in hopes of “pulling back the curtain from a secretive and unaccountable Federal Reserve.” Supporters of the legislation think that the American people should have more oversight over the vast sum of money that the Federal Reserve controls. The website continues, “With recent bailouts and spending decisions shining a spotlight on the actions of the Federal Reserve, more and more pressure is bearing down on Congress to take action and demand accountability and transparency.”
A closer examination of the video reveals that Frank is talking about a larger, more encompassing piece of legislation which would subsume HR 1207 and include additional mandates for consumer protection. Here is a transcript of the YouTube video:
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.”
