What happened to the Anti-Fed left?

That's what Paul-Martin Foss wants to know following Senator Elizabeth Warren's public opposition to Audit the Fed and Senator Bernie Sanders call for a Federal Reserve bailout of Greece, especially when:

 "....pretty much everything the Fed does with relation to monetary policy is exempt from audit. Those trillions of dollars of securities the Fed purchased? Too bad, GAO, you can’t audit them. As Deputy Comptroller General Ellsworth H. Morse, Jr. testified in 1977 when the bill that introduced these restrictions was being debated :

The bill provides authority to make comprehensive audits of the operations of the three named bank supervisory agencies. Two restrictions are provided:
1. The audits will not include transactions conducted on behalf of foreign central banks.
2. The audits will not include monetary policy deliberations and open market transactions conducted to promote
maximum employment, production and purchasing power.

H.R. 2176 provides that our auditing would not include open market transactions conducted by the Federal Reserve System. We strongly suggest that this restriction be modified. The open market transactions are the largest category of financial transactions carried out by the System.

We do not see how we can satisfactorily audit the Federal Reserve System without authority to examine the largest single category of financial transactions and assets that it has. It is our understanding that the restriction in the bill that we would not audit monetary policy deliberations and open market transactions grows out of concern that our auditing would somehow undermine the independence of the Federal Reserve System with respect to its monetary and credit operations and damage the Nation’s monetary policymaking system. Needless to say, as we have testified on previous occasions, we do not concur in this view.

As Mr. Morse alluded to right there in his testimony, Comptroller General Elmer B. Staats testified in 1975 on an earlier Fed audit bill that contained no such restrictions and addressed some of the concerns of GAO’s critics:

The bill provides no restrictions of any kind on the scope of the GAO audit or on access to records for audit purposes. This is satisfactory to us. In fact, if we are to be authorized and directed to audit the Federal Reserve System, we would recommend that the authorizing law contain no restrictions.

Last year when legislation on this subject was being considered, charges were made that a GAO audit would undermine the independence of the Federal Reserve System with respect to its monetary and credit operations and damage the Nation’s monetary policymaking system. Needless to say we do not concur in this view.

Should the Congress wish to restrict the audit to take into account this criticism, one restriction that could be written into the law would be to specifically provide that our audit reports to the Congress or its committees shall not contain conclusions or recommendations with respect to the economic effects (as opposed to the efficiency and economy) of open market and discount operations.

There you have it. The objections on the part of Mrs. Warren and the various Federal Reserve Presidents are not new, they’ve been debated for over 40 years. These statements from GAO addressing Mrs. Warren’s concerns aren’t hidden, they’re freely available on the GAO website for anyone who wants to take the time and effort to search them out and read them. Either she and her staff haven’t bothered to study the legislative and historical record, or she is intent on carrying the Fed’s water (or both).

The Fed knows exactly how thorough a full GAO audit could be, which is why it and its defenders in Congress such as Mrs. Warren are so vehemently opposed to Audit the Fed. An audit of financial statements, which is already required under law, is not the same as auditing the actual assets on the balance sheet. Congress wants to know who the Fed is helping, and to what extent they are helping them.

Read the whole piece here and if you haven't yet sign the Audit the Fed petition.


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