One of the arguments made by Federal Reserve apologists against the Audit the Fed bill is that the Fed already undergoes a yearly financial audit. What these arguments ignore is that a financial audit does not provide the type of information about the Fed's conduct of monetary policy necessary to give the American people a full picture of the Fed's operations.
Paul-Martin Foss of the Carl Menger Center points to the failure of financial firm Third Avenue's "junk" bond division to illustrate the inadequacy of a strictly financial audit. Third Avenue not only passed its most recent financial audit, but the auditors said the liquidation of the junk bond department would not effect their valuation.
As Paul-Martin says:
It should be clear from the case of Third Avenue that external financial audits of this type are just perfunctory box-checking that are intended to assuage the casual observer, not an indicator of sound financial health even within the short term. Therefore it is more important than ever that the Federal Reserve actually face a substantive audit by Congress. What exactly is the Fed doing, and why is it so intent on shielding its behavior from Congress? Congress needs to eliminate the restrictions on GAO audits of the Fed so that it can finally figure out what exactly the Fed is doing and for once hold the Fed accountable for the consequences of its actions.
Read the whole thing here.
The Senate vote on Audit the Fed is next Tuesday, please help Campaign for Liberty put maximum pressure on the Senate by pledging to call your Senators in support of the audit bill.
Tags: Audit the Fed