An interesting dichotomy occurred on Capitol Hill today.  At the same time, in two different parts of the Capitol complex, the Federal Reserve was the topic of discussion.

On the one hand, there was Congressman Paul and his Subcommittee on Domestic Monetary Policy discussing his efforts to Audit the Fed, as well as the results of the “audit” provision included to the Dodd/Frank bill.

On the other was Ben Bernanke, appearing before the Joint Economic Committee to discuss the bleak “economic outlook.”

As I was returning from Dr. Paul’s hearing, I received a phone call from a friend who informed me that while Senator Mike Lee was questioning Ben Bernanke about the Fed never undergoing an audit, Bernanke snarkily responded that it was an “urban legend” and “informed” Senator Lee that the Federal Reserve was completely audited, regularly.

It’s funny Bernanke would say that.  The issue came up in the Subcommittee hearing as well. 

To clear this up for Bernanke and for others who have argued the same, the Federal Reserve undergoes “financial audits” from outside groups, not an audit of performance evaluation like the Government Accountability Office could conduct if the restrictions in subsection (b) of section 714 of title 31, United States Code were eliminated.

When asked directly, the GAO representative said that the limited one-time “audit” in Dodd/Frank, looked at areas of the Federal Reserve that never were scrutinized before.

As stated numerous times throughout the Audit the Fed hearing, the Federal Reserve is a creature of Congress, and as such they must be subject to Congressional oversight.

Dr. Calabria from the Cato Institute stated that if the Fed were to have “independence” from any part of our government it should be the executive branch, which in reality, they are now the closest to.  He also suggested that since the GAO exists to educate members of Congress and their staff, there is no area more in need of education than monetary policy and macroeconomics.  In his opinion, the more complete the audit the better.

One member was concerned about the Fed having no oversight, and asked the GAO representative if she would have a problem looking into the Fed more.  Her response was simply that the GAO would do what Congress asks it to do.

The overall feeling from the members of Congress and witnesses present at the hearing was that there was a definite need for oversight at the Federal Reserve by Congress – now it is up to Congress to decide whether they will pursue the necessary oversight.

Another key takeaway was that a lot of important information came out of the limited one-time “audit” included in the Dodd/Frank bill, such as the Federal Reserve made over 550 loans to foreign central banks from December 2007 until June 29, 2011.

One witness in particular I felt made this hearing quite exceptional.  Dr. Robert Auerbach, author of the book Deception and Abuse at the Fed, and former economist on the Financial Services Committee praised the efforts that led to the “audit” in Dodd/Frank and congratulated those who worked so hard to finally get a glimpse behind the curtain at the Fed.

His familiarity with corruption instances at the Federal Reserve was simply astounding.  For instance, in 1962, the Federal Reserve began loaning to foreign central banks without any Congressional approval and has been doing it ever since.  In 1976, Fed Chairman Arthur Burns decided the Fed would no longer publish transcripts of their central policy making decisions – they now release them only after a delay of five years.  In 1995, they began destroying records of FOMC meetings – the inspector general said when asked at the time, “We think it’s legal.”

The delay in releasing Federal Reserve information, Dr. Auerbach charges that it allows billions of dollars to be made off insider information learned through “Fed leaks,” because hundreds of investors around the world are involved in “secret” conference calls about the Fed’s interest rates decisions before the public at large is ever informed.

There are many other stories he shared, but for brevities sake I cannot delve into, including the Fed “paying off” academics through contributions to universities.

Overall, the case was certainly made today why the Federal Reserve needs oversight.  By making the case for oversight, we are not saying Congress should manage the monetary supply as some have suggested, but rather that it should be left up to the free market. 

Based on everything seen and heard today, the Federal Reserve, the White House, and bank lobbyists need to stop fighting a top-to-bottom audit of the Fed and recognize it is an idea whose time has come.  This Congress is our chance, perhaps the last opportunity for quite some time, to pass Audit the Fed.

Won’t you stand with us as we reach out to grassroots America and slam into DC with a tidal wave of support for Audit the Fed?