And Paul-Martin Foss , founder and President of the Carl Menger Center for the Study of Money and Banking, has it in for the Fed.
Paul-Martin recently examined Richard Fisher and Jerome Powell's criticisms of Audit the Fed to see if they have any validity (SPOILER ALERT: they don't).
The piece is a few weeks old but is still a must-read, as shown by these excerpts:
Leading the charge against Audit the Fed this week is retiring Dallas Fed President Richard Fisher. On Monday he said:
“I’ll be blunt: we are audited out the wazoo,” Dallas Fed President Richard Fisher said on Fox Business Network. “This (bill) is about interfering with the making of monetary policy. I respect the gentleman from Kentucky but he is wrong,” Fisher said of Senator Rand Paul, who backs the bill.
Shall we take a look at Fisher’s assertions?
If you go to the GAO website and search for “Federal Reserve” you’ll come up with a couple thousand results, most of which contain only brief mentions of the Fed. Wading through the past three years worth of GAO publications, you find that most mentions of the Fed come during GAO’s review of the various rules promulgated by financial regulators under the Dodd-Frank Act. The only audits or anything close to audits deal with such things as:
- Areas for Improvement in the Federal Reserve Banks’ Information Systems Controls
- Actions Needed to Improve Coin Inventory Management
- Foreclosure Review: Regulators Could Strengthen Oversight and Improve Transparency of the Process
- Government Support for Bank Holding Companies: Statutory Changes to Limit Future Support Are Not Yet Fully Implemented
These are hardly hard-hitting topics, nor do they involve auditing the Fed “out the wazoo.”
But just because someone is unelected doesn’t mean they’re any less a politician. Generals don’t progress to flag rank due to their martial prowess but rather because of their ability to navigate the politics of the promotions process. And anyone appointed to the Federal Reserve Board doesn’t get the appointment because of a devotion to sound money or understanding of good economics but rather because they are going to be someone who does what the President wants and doesn’t rock the boat. Let’s not forget that the Federal Reserve Board is an executive agency and maintains a majority of the seats on the FOMC, which makes monetary policy decisions. Thus monetary policy in the United States today is firmly under the control of the President, not Congress.
When you work at a job that’s created by Congress, your job is to do what Congress tells you to do, not what you think you ought to do. For Fisher to turn around and try to lobby Congress, who chartered the Federal Reserve Banks in the first place, not to tell him what to do is the epitome of chutzpah. Imagine a worker at a manufacturing plant whose boss asks him how many widgets he’s produced. The worker tells the boss to butt out, it’s none of his business. How quickly would that worker get fired? Fisher may be feeling his oats since he’s stepping down in a month anyway, but his attitude will live on, as not only his successor but also his fellow regional Federal Reserve Bank presidents share his outlook.
What this all boils down to in the end is a fight over control. Should Congress remain in control of the agencies it has created, or should those agencies be able to do what they feel like doing without Congress being able even to find out what they are up to? The Federal Reserve has gotten its way in the past and has been able to bully its opposition to get get what it wants. Operating in the shadows has certainly helped. Now that the Fed has a more prominent public profile, and now that more and more people are aware of the what the Fed does, the movement for greater transparency is advancing. The Fed cannot be allowed to continue doing what it is doing without any effective oversight.
Tags: Audit the Fed, Carl Menger Center