Saw this via memeorandum:
Paul’s legislation, popularly known as the “Audit the Fed” bill, has drawn 244 cosponsors, ranging from Ohio’s John A. Boehner , the conservative Republican floor leader, to Michigan’s John Conyers Jr. , the liberal Democratic chairman of the Judiciary Committee. Some Democrats have even picked up on Paul’s rhetoric. “It’s time to yank the shroud off the Fed and shine some light on these events,” New York Democrat Edolphus Towns , chairman of the Oversight and Government Reform Committee, said at a hearing last week about the shotgun marriage between Bank of America and Merrill Lynch last fall to stave off the latter’s collapse.
Paul’s efforts have only gained in political significance since the Obama administration unveiled its proposal to give the Fed new powers over the financial regulatory system.
Now, it wouldn’t surprise me if Paul’s desire is to go much farther than simply auditing the Fed (translation, I’m too lazy to google whether or not he wants to get rid of the Fed), but can anyone give me a reason why we shouldn’t audit the Fed? And why haven’t we been doing that all along?
BDeevDad
Because we’d be shitting bricks when the results came out. And yes, Paul wants to get rid of the Fed and go back to a gold standard.
KG
yeah, what BDeevDad said.
TenguPhule
foxes searching henhouse.
calipygian
Why do you wan’t to go looking under than rock?
Haven’t you seen the end of “The Wizard of Oz”? Or know the story of Pandora’s Box?
Start looking at how the sausage is made and we’ll go real quick from “You can’t handle the truth!” to “They really did it! Damn them all to hell!” in about a generation.
demkat620
Because these are very serious people who would never lie. Like evar. And then only for money. And its not like any of that is involved.
Sheesh.
chuck
Ron Paul is a goldbug of the first magnitude, who has only one note, and that’s to return to the gold standard under which we never had any economic instability, panics, or depressions and peace and love covered all the earth.
I agree that the Fed needs controls, but I wouldn’t know how to implement them without giving monetary policy to a body I would trust even less than the Fed.
Travis
Openness in general is a good thing. Audits are frequently useful, even when inconvenient.
But, as BDeevDad noted, Paul is one of a number of people who feel that the Fed itself is an invalid, unconstitutional entity. The request is tainted by the actor.
In addition, there are a plentiful number of bright-eyed folks in fixed income trading that would love to know as much as possible about what the Fed has considered, is considering, is planning, etc. Right now, there’s an orderly process for releasing that information after it is immediately useful. I would want to know more about what they want.
In addition, there’s lots of “who shat the bed?” thinking in terms of simple-minded accusations of the Fed, SEC, Freddy Mac, Fannie Mae, etc., and their role in the current credit and housing crisis. I’m happy with many parties being found guilty, but I am extremely dubious when people believe they’ve found the sole villain. It’s a really complex fuck up.
bleh
Oh please! This is such disingenuous grandstanding I don’t know whether to laugh or cry.
Look, by statute, the Fed is a creature of Congress. It was deliberately set up that way to insulate it from Executive control. The whole point of this is to keep the central bank at least somewhat insulated from day-to-day political forces.
In the meantime, of course, if the Congress wants to know what the Fed is doing, all it has to do is ask, in any of the regular oversight hearings it conducts.
The real reason they don’t want to know is that they don’t want the responsibility of knowing, or of allowing anyone else to know. A word from the Fed moves markets. An action by the Fed can save the day — or cause widespread and long-lasting ruin. The regular testimony by the Chairman to the Congress is deliberately oblique, precisely in order to keep the idiotic herd animals of Wall Street from stampeding this way and that, and wrecking the entire economy … again.
Do you think Congress — many of whose members would have trouble spelling “economics” — really wants to know what the Fed thinks, and why it does what it does? Do you think they want lobbyists in their offices stuffing their pockets full of money and asking them to pressure the Fed to do this or that? Do you think they want to be within a mile of setting national monetary policy, or of balancing inflation and employment?
Puh-lease. This is all show and no substance. They don’t want an audit of the Fed (I doubt they even know what that means) any more than they want to have to read and understand Supreme Court decisions. They just want to posture and pronounce heavy-sounding words, and then scamper away before they can be blamed for any damage.
Comrade Stuck
I think Paul pretty much wants to get rid of every federal agency, and introduce American life to “kill or be killed “dog eat dog” “every man for himself” “survival of the fittest” and any other anarchic cliche that exists. Nuts.
b-psycho
So…anyone else here both anti-fed & skeptical of a gold standard?
IMO, the goldbug stuff is more a sign of how far gone the system is, rather than a serious proposal of alternative: bottom line, if you think it’s safer to hold chunks of shiney rock than currency, your economy is headed to Screwedville. Goldbuggery is a reverse-canary in that respect.
I don’t know what could replace what we have now, but it simply cannot hold. Barring a total financial & monetary reset, either we’re going to see soul-crushing interest rates or Zimbabwe-style inflation eventually.
Sean
I heard Bernanke explain that the Fed is critical for shoring up banks, and even healthy banks need cash from time to time. If the banks were afraid that their names would become public they would not seek the funds, adding to instability in the system. Or something like that.
Joshua Norton
And the loony-tarians fail to realize that they’d be part of the first wave of people hung by their heels from the lampposts in the town square.
It always seems to end up that the main job of the “libs” is to save all the assholes from themselves in order to save the country from slipping into Mad Max territory.
metricpenny
Serious questions:
Who was auditing the SEC?
Will it be the same entity/group?
BDeevDad
@b-psycho: I don’t know enough to be skeptical or not (of the Fed and/or gold standard), but one option I heard is to allow competing non-governmental currencies backed by whatever standard the currency creator sets up. Sounds nuts to me, but the ultimate in free market economics.
maya
bleh:
So, that’s what Greenspan was doin’?
Comrade Dread
Me. I think the necessary deflation that would occur if we transitioned back to a gold standard would likely be catastrophic. Of course, that is also an argument as to why the current system is a f*** up, for letting things inflate so wildly over the last twenty years to begin with. (I know there are other factors.)
But I’m not sure what we could get to replace it. And if we’re going to keep the central bank, then there needs to be a lot more (and a lot better) oversight of the system we have now. Paul’s bill, on the surface, would be a step in the right direction.
As to why it’s not that way now, I’d imagine that the old Congress of yore that created the Fed was just as irresponsible and short-sighted as the current one and drafted and passed the bill while half of them were anxious to get to appointments with their whores and figured the details would work themselves out later.
arguingwithsignposts
Um, No.
Seriously, if Obama is proposing that the Fed be this Uber-regulator, then there needs to be more oversight, and more openness.
Joshua Norton
That was exactly the conditions that caused the need for a national currency in the first place. Each bank issued their own notes and no one knew what anything was worth or what bills were safe to accept. Not to mention counterfeiters having an absolute field day.
demimondian
@BDeevDad: Uh, yeah…no
You see, there are two different notions in which that could be done — one, in which banks issue depository notes promising to make certain debts good, backing them with their own credit, and another in which banks promise to make those same debts good, backing them with the full faith and credit of the United States of America. Guess which one the libertarians want? Guess which one we already have? (PROTIP: they’re different.)
b-psycho
That’s a lot of cosponsors, btw.
Heh…I was going to reveal my bet that Pelosi would spike the bill regardless, but I did a search to be sure. Turns out she actually made some noise towards it. I’m shocked.
BDeevDad
@demimondian: Like I said,
I know nothing. /Bad German Accent
BombIranForChrist
I think some of the deliberation process should be secret. You don’t want Senator Bubblecock using notes from a fed lunch meeting for his own personal ambitions, but most of it should see the light of day.
Ultimately, we need to take the information and study exactly how the fed uses that information to make their decisions.
Alan Greenspan had a nice little racket going where he would walk up to a microphone, read a few pages out of a thesaurus (in sequence), and then go back into his hole where he would conveniently forget facts that did not support his world view. But look where that got us.
True, some politicians will try to make hay out of more detailed audits, but what would you rather have … a politician trying to squeeze political advantage out of exact facts and figures or a politician taking vague statements by inappropriately revered men and using those vague statements to support whatever the hell he wants?
Comrade Dread
Unfortunately, one problem, among others, will be that if the recipients of our notes lose faith in the US government’s ability to repay them, we’re up s*** creek.
b-psycho
I’m actually surprised that skepticism of the Fed isn’t more the domain of the Left, to be honest.
Napoleon
It is a good idea, regardless of Paul’s motivation.
Jon H
Two words: ratings downgrade.
Adam Freeman
Paul does want to get rid of the Fed. However the argument against auditing the fed is that it would politicize the Fed which is supossed to be politically independent.
The audit by itself will not jeporadize the Feds independence but, once you audit the Fed the question than becomes what do you do with the results?
What happens if congress dosen’t like the results. What happens if the president dosen’t like the results?
b-psycho
I wonder whatever happened with that IMF audit…
KG
I’m indifferent to the gold standard… need to do some reading on it, really. I’m not too keen on the Fed, but I’m also not too keen on most government agencies.
@27: well, the question becomes, if there is one government agency that need not answer to Congress, the President, or even the Courts (my area of practice involves the Truth in Lending Act and the Courts constantly defer to the Fed in promulgating rules), then what is to become of our republican (note the small “r”) system? I think a lot of this comes back to the fact that there was no real oversight of the Fed. An audit seems like as good a place as any to start, at least until we get some people in elected office who know the difference between economics and the Necronomicon.
Johnny B. Guud
Exactly. Auditing the Fed would point out exactly who and what actually pulls the strings at the most powerful central bank in the world.
The American people know it already, but they would rather not be told that the country is, indeed, actually run by bankers, most of whom have recently received ample TARP money.
passerby
@b-psycho:
From your link:
Der Spiegel wrote that the IMF had “informed” Federal Reserve chairman Ben Bernanke of plans that would have been unheard of in the past: a general examination of the US financial system. The IMF’s board of directors has ruled that a so-called Financial Sector Assessment Program is to be carried out in the US.
This, Der Spiegel wrote, “is nothing less than an X-ray of the entire US financial system”, adding that “no Fed chief in US history has been forced to submit to the kind of humiliation that Ben Bernanke is facing”.
Ben Bernanke may be facing a lot more than humiliation, Ben Bernanke may be facing prison.
edmund dantes
What you don’t care to know the 8+ trillion dollar bets the Fed has been making on the taxpayer’s back?
Yes there is a reason for the Fed to be independent, but think of the amount of power associated with it and total secrecy on top of it? People actually think that’s a good combination?
sparky
Any time you see D. Issa and E. Towns together on something you know it’s claptrap. Apparently Congress is studying to become the NYS senate.
Even though this is a monument to misdirection, it still is Na Ga Ha Pen.
Dennis-SGMM
Do the Paulites (Paulistas) have a plan for coming with the necessary quantity of gold with which to back up our currency? Do we all just mail in grandma’s gold earrings or…
b-psycho
I think Bernie Sanders introduced the Senate version, if I remember correctly.
chopper
@bleh:
bleh wins the internet.
chopper
@b-psycho:
well, the gold standard is idiotic. there’s not enough gold that’s ever been mined to work out when it comes to just the dollars floating around in our economy, much less eurodollars. can’t say i wouldn’t be happy tho when gold is revalued at like 50 grand an ounce and those gold coins i got’ll buy a mansion, but its an idiotic idea nonetheless.
cliff
Scalia breaks ranks, slams Bush officials on bank regulation
WASHINGTON — In a rebuke of the Bush administration, the Supreme Court ruled Monday that a federal bank regulator erred in quashing efforts by New York state to combat the kind of predatory mortgage lending that triggered the nation’s financial crisis.
The 5-4 ruling by the high court was unusual. Justice Antonin Scalia, arguably the most conservative jurist, wrote the majority’s opinion and was joined by the court’s four liberal judges.
The five justices held that contrary to what the Bush administration had argued, states can enforce their own laws on matters such as discrimination and predatory lending, even if that crosses into areas under federal regulation.
.. snip ..
demimondian
@Comrade Dread: Yeah, well, auditing the Fed isn’t gonna do that, one way or another. The fed is worth exactly the number of dollars the Fed says its worth, no more, no less. They control the number of dollars *in existence*, after all — they can print as much money, or as little, as they like.
How do you audit an entity like that?
gex
@bleh:
Good God, can you imagine what kind of grandstanding and bloviating Pence would have to do just to hide the fact that he doesn’t understand any of it?
Edward G. Talbot
Sheesh, of course we need transparency. The alternative (which is what we’ve had for at least 30 years) is that we simply have to trust a group of the most powerful men (ok maybe a few women) in the financial world to do the right thing behind closed doors. Few things are more antithetical to democracy than the combination of a lack of transparency and money. Worries about shaking the markets have some validity, but at some point we have to say enough is enough. I see no reason why that time shouldn’t be now.
That said, I’m not in a rush to abolish the Fed. But it needs to change. The idea that it is not subject to political pressure is the worst kind of misdirection. Instead it is beholden directly to the big money that is behind the political pressure in the first place. Make it part of the government. At least that way the money men will actually have to pay lobbyists to control things, they won’t be able to do it directly.
Katharsis
I’ve been waiting for someone to say the same thing I’ve been thinking for awhile. Kudos B-Psycho!
I don’t believe Gold is the answer because it is just another form of currency. Period. Sure it is in finite amount, but that doesn’t make it better. All currencies are subject to hoarding and manipulation. Doesn’t matter what it is made from.
Currency is a distinctly human invention, the likes of which exist no where else in nature. A universally fungible resource that doesn’t really decay… unless we make it lose value(i.e. inflation)? It’s an abomination.
I’m not saying currency should be dusted, I’m just saying it doesn’t obey the laws of nature, because it is unnatural. Unnatural things tend to be unbalanced and create more harm than good. We need to find a way that defines it in terms of real natural wealth, not just how much we can find of it, or how much we think we need of it.
I like Jack Vance’s idea–I know, he’s just a sci fi author not an economist, but still–some amount of money equals one hour of labor. Then our currency is regulated by how many people there are(as it should be for a human only resource) and by something of true value: time.
I personally believe it is because our value system concerning money is so abstracted from nature, we doom ourselves if we don’t put the rules of nature back in.
And no I don’t mean “Survival of the fittest” crap that was popularized more by Darwin’s cousin the ECONOMIST, than by Darwin himself. I mean the new story of evolution coming down the pike… Survival of the Cooperative.
Oh yeah, and this Lefty thinks the Fed can suck it and be abolished. “We are not responsible enough to govern ourselves” didn’t work for the Founders, and it doesn’t work for me!
**feels hook around throat**** okay I’ll get off the soap box now.. :p
BruceFromOhio
@Edward G. Talbot:
This is just wrong. The only thing that can allow a central bank to function properly over time is to immunize it as much as possible from the politics of the day. Think of DeLay and Murtha and the string-pulling that feathered who-knows-how-many nests.
And if you can stand the dense language, the Board of Governors describes what is on and not on the balance sheet. Between the Treasury, the Board and independent, outside audit of the Reserve Banks, the Fed is audited almost continuously. And unlike the conspirational imaginings, what the FOMC bases its decisions on is published twice every quarter in the fricking Beige Book. There’s a lof of dry policy research, not much magic or “backroom dealing.” As bleh mentioned upthread, Congress already has oversight responsibilities. It’s like asking the waiter for a steak when one sits on the plate in front of you.
Senator Paul is a grandstanding asshole that knows not what it is he seeks, or the ramifications. Congress didn’t just up and decide, “Hey, let’s make a central bank! And afterward we can go for cocktails!” Another trip to 1907 would easily demonstrate the frailties of the gold standard and the power vacuum of a giant economy without a functioning, independent central bank. Well, gosh, no thanks. What we have isn’t perfect, but it just helped save our asses from another fullblown depression.
BruceFromOhio
@Katharsis:
Yes, let’s be beholden to the billionaires of the world to bail our asses out. That’ll teach us! Let’s get rid of the electric utilities, too, we can generate our own goddamned power!
No thanks. The robber barons of yore had limits, and paid a certain fealty to Uncle Sam. When I think of Bernie Madoff getting 150 years, I expect we are past that point.
OriGuy
It’s just like handling the till at the farmers’ market back in Indiana.
/Pence
Katharsis
“BruceFromOhio
@Katharsis:
Oh yeah, and this Lefty thinks the Fed can suck it and be abolished.
Yes, let’s be beholden to the billionaires of the world to bail our asses out. That’ll teach us! Let’s get rid of the electric utilities, too, we can generate our own goddamned power!
No thanks. The robber barons of yore had limits, and paid a certain fealty to Uncle Sam. When I think of Bernie Madoff getting 150 years, I expect we are past that point”
***Hates block quote function***
That makes sense because the Fed is such a public entity like utilities… :/??!!
BPC
Ron Paul does want to get rid of the Federal Reserve but this bill would not do that.
I don’t see a real argument against a full audit of the Fed’s operations. The Fed has loaned, guaranteed, and printed literally trillions in the past year, I think we should probably know where that money is going, especially since Congress has given hundreds of billions to the banks who are borrowing from the Fed.
As for the Fed’s “independence” I don’t think any organization in Washington that has ties to the government is truly independent, could you imagine Bernanke coming out against TARP or the stimulus?
Also, Paul does not call for a strict gold standard, he just believes in allowing gold and silver currencies to compete against the dollar and be used as legal tender. Big difference.
BPC
@BruceFromOhio:
Yeah, Congress was only thinking of helping out the people when the Fed was created, no influence from banker oligarchs at all.
Again, Paul does not call for a gold standard at all, this bill certainly has nothing related to a gold standard in it.
As for the Fed saving us from a second great depression, that is pure, unprovable, hyperbole.
If congress has oversight, why can’t a member of congress get an answer to a question like this?
b-psycho
@BruceFromOhio:
Yes, because big money has so little power at the moment…
Wilson Heath
Yes, Ron Paul had previously introduced bills to eliminate the Fed. No rush on cosponsorship, and his whackjob nonsense doesn’t really [ever?] get out of committee. Back down whacko to plausibleish and he’s getting ready to lead the GOP into their next rout.
drillfork
@bleh:
Congress at least takes some interest in this area…
http://digbysblog.blogspot.com/2009/06/shameless-by-digby-coincidence-im-sure.html
Perry Como
SUNDAY SUNDAY SUNDAY
MAIDEN LANE XVIII
Bring you kids, bring your yachts, bring your kickbacks!
It will be a rip-roaring-tax-payer-raping good time!
Did you make some bets on both sides of the bubble?
NO PROBLEM!
We will settle all of your debts at TAX PAYER EXPENSE!
Are you worried about public scrutiny about settling 1:1 while playing both sides?
NO PROBLEM!
We have an unaccountable quasi-governmental organization full of ex-employees to cover your asses!
COME SEE MAIDEN LANE XVIII
SUNDAY SUNDAY SUNDAY
Augustine
@Katharsis:
cf Buckminster Fuller’s kWh currency.
abstracts the notion of labor to that of energy, helpfully avoiding the labor vs. capital steelcage match.
Stephen
I’m confused, I thought the Federal Reserve was audited, at least in the sense that I’m familiar with at most public companies (I work in the investment industry).
Audited financial statements of the Fed for 2008 below, including auditor’s opinion on page 3:
http://www.federalreserve.gov/oig/…/BOG_Financial_Statements_2009.pdf
And yes, Ron Paul does want to abolish the Fed, though I am too lazy to find out what this bill in particular wants that doesn’t already occur so if anyone knows, I’m all ears.
http://www.house.gov/paul/congrec/congrec2002/cr091002b.htm
b-psycho
@Stephen: Your 1st link got screwed up.
BruceFromOhio
@BPC:
You mean, just like doing away with it will magically make ponies appear?
Google “Panic of 1907”. Please?
Can’t see it here, have to look later, will try to get you an answer. My point is Congress has oversight power, the Fed does get audited, and it’s my opinion Ron Paul is not the one to lead any charge to throw out the baby, the bathwater and an institution that helps keep economic disaster at bay. That I’m in the minority on this thread is evident. If Paul is looking to audit someone, I’d start with the SEC and whoever made the most money from castrating the Glass-Steagall act in 1999.
@Perry Como:
ROFL. You got it, babe. When all you got to work with is damaged goods and almost 8 years of gutted regulations, that’s what you end up with. AIG et al set the place on fire, and late on SUNDAY SUNDAY SUNDAY night, that’s what helped put it out. Cure worse than the disease? We won’t know for a decade. And you can bet your last euro its going to get audited, and audited, and audited, and …
liberal
@b-psycho:
Me, for one.
The problem isn’t just the Fed. It’s the fact that banks are given the privilege by the guvmint to create money out of thin air, lend it out, and pocket the interest on it.
I’m skeptical that a gold standard could be workable. OTOH, I’m quite willing to believe that there are ways of constructing a banking system so that the government captures that value on behalf of the citizenry, as opposed to giving it away to banks for free.
chuck
@Katharsis:
The main difference is that you can’t just make more gold. While it can be mined, there’s still a finite supply, the economy becomes zero-sum and a closed loop, or at least a lot more so than a fiat currency.
It also means that the economy goes from being dictated by bankers to being dictated by miners, and doesn’t really add a lot of stability to the bargain. As standardized commodities go, the world economy is arguably oil-based anyway, which has the added bonus of actually threatening the entire biosphere in the bargin.
Jim Norris
The Economist on why Republicans are suddenly opposing Bernanke:
Stephen
My bad, below is the link to the audited financial statements of the fed.
http://www.federalreserve.gov/oig/files/BOG_Financial_Statements_2009.pdf