If I heard him correctly in a recent Dartmouth, MA town hall a key Democrat, Rep. Barney Frank, said he was working with Paul on fine-tuning the legislation over concerns that instant/real-time information disclosures on Fed dealings would enable market gamesmanship and distortion.
Frank said the legislation would see the House floor some time in October.
Primary Sponsor Ron Paul (R-TX) recently made the case in the Philadelphia Inquirer :
Ron Paul is an 11-term Republican congressman from Texas and honorary chairman of the Campaign for Liberty [www.campaignforliberty.com]
The Federal Reserve's unprecedented intervention into the U.S. economy has inflamed more Americans than almost any other issue in recent memory. More than 75 percent of Americans now support an audit of the Federal Reserve system, and it's no wonder.
The most conservative estimates place the potential cost of the Federal Reserve's bailouts and guarantees at about $9 trillion. That is equivalent to more than 60 percent of the U.S. economy, all undertaken by one organization, and almost all of those transactions are exempt from congressional oversight and public scrutiny.
The Fed and its apologists are using bogeymen to deflect criticism. If the Fed were audited, they argue, monetary policy would be compromised as Congress tries to direct the Fed's actions, and the Fed's record of economic stability and low inflation would come to an end. Nothing could be further from the truth.
Legislative proposals such as my bill H.R. 1207, the Federal Reserve Transparency Act, merely remove all exemptions from audits of the Federal Reserve and call for a full audit. Every intervention, every bailout, every credit facility would be subject to an audit.
Nothing in this proposal would call on Congress to involve itself further in monetary policy, as that is completely unnecessary. Article 1, Section 8 of the Constitution already grants Congress the power "to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures." Also, Congress already dictates monetary policy to the Federal Reserve through the mandates of full employment and stable prices.
Arguments that tout the Fed's ability to stabilize the economy or keep inflation low are similarly misguided. The Fed's mismanagement created the Great Depression, the stagflation of the 1970s, and now our current economic crisis. Over the nearly 100 years of the Fed's existence, the dollar has lost nearly 95 percent of its purchasing power. A "mild" rate of inflation of 2 percent per year means that a baby born today will see the dollar's purchasing power erode by a further 75 percent over his lifetime. If this boondoggle is the Fed's definition of stability and sound management of the dollar, I would hate to see what instability looks like.
Yet that is exactly what we face today and in the near future with a federal government and a Federal Reserve working hand in hand to bail out favored Wall Street firms with sums of money that have quickly reached absurd proportions.
We have a national debt approaching $12 trillion, Social Security and Medicare costs skyrocketing, and an economy in worse shape than at any time since the 1930s, and yet our leaders continue to put taxpayers on the hook for trillions of dollars.
The Federal Reserve has used all the tools in its toolbox to try to stave off the inevitable economic collapse caused by its decades of loose monetary policy, all to no avail. Despite all of this mismanagement, we are counseled to keep our faith in the Fed, to trust in the wisdom of the policymakers, and to continue to exempt the Fed from any serious oversight.
The fact that a single entity, the Federal Reserve, has dominated monetary policy for so long has been detrimental to the economy. As long as we try to keep up the fictions that the Federal Reserve works to benefit the American people, that attempting to fix interest rates will not distort the economy, and that the Fed can end a recession by injecting liquidity, we will never free ourselves from the boom and bust of the business cycle.
A necessary first step to restoring economic stability in this country is to audit the Fed, to find out the multitude of sectors in which it has involved itself, and, once the audit has been completed, to analyze the results and determine how the Fed should be reined in.
Proposals to push the Fed back into the shadows, or to give it an even greater role as a guarantor of systemic stability, are as misguided as they are harmful. The Federal Reserve is a creature of Congress, and it is the responsibility of Congress to oversee it. If we fail in this endeavor, we will have only ourselves to blame as our economy sinks deeper into depression.
"I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." Thomas Jefferson