I recently sent a letter to Washington state representative Rick Larsen voicing my support for an audit of the Federal Reserve HR 1207. Below is his response:
I was recently catching up on my correspondence and realized I had not yet responded to your message. Thank you for contacting me about the Federal Reserve Transparency Act (HR 1207). I appreciate hearing from you and apologize for the delay in my response.
As you may know, HR 1207 would repeal the restrictions on Federal Reserve audits and require the Government Accountability Office (GAO) to conduct an audit of the Federal Reserve immediately and make its findings available to Congress. HR 1207 has been referred to the House Committee on Financial Services where it awaits further review.
I do not support HR 1207 and will not be signing on as a cosponsor to this legislation. I would like to take this opportunity to explain my position to you.
The Federal Reserve is already subject to independent audits. The GAO has audited the Federal Reserve over 100 times since it was created in 1913. The Federal Reserve has also been audited dozens of times by independent accounting firms.
The GAO is not allowed to audit the Federal Reserve’s decisions on monetary policy or its transactions with foreign governments and central banks for very good reason. Opening up the Federal Reserve’s day-to-day decisions on monetary policy exposes our monetary policy to politics. The Federal Reserve is an independent agency for a reason. If the financial markets think that the Fed’s actions are politicized, investors will lose confidence in the Federal Reserve and our markets will decline.
The Federal Reserve and Congress have recently taken steps to increase the transparency of the Federal Reserve. The Federal Reserve has begun publishing their balance sheet on their website, www.federalreserve.gov. This report gives information about the Federal Reserve’s balance sheet and lending programs and provides considerable new information about the number of borrowers at their various facilities, and the collateral pledged. Congress also passed the Helping Families Save Their Homes Act (HR 1106) in March to allow the GAO to audit some of the Federal Reserve’s emergency actions, such as their guarantees of Citigroup and Bank of America.
I believe the Federal Reserve should continue to be subject to public scrutiny. The Federal Reserve does not always make the right decisions. Both Federal Reserve Chairman Ben Bernanke and former Federal Reserve Chairman Alan Greenspan have admitted that the Federal Reserve has made mistakes in the past. Congress is learning from these mistakes and I am working with my colleagues to fix them through reforming the regulation of our financial markets to prevent a crisis from reoccurring. As the 111th Congress progresses I will be sure to keep your thoughts in mind.
Thank you again for taking the time to contact me. Although we disagree on this issue I am sure there are many more issues on which we agree. Please do not hesitate to contact me in the future about this or other issues of concern for you.
United States Representative
Washington State, 2nd District
Rick says that the federal reserve has been audited over 100 times… that’s great but we are interested in the monetary policy side of things which has been audited in the past however the results are not made available to Congress or the public. He goes on to say that if we ever did audit the monetary policy things would become politicized and our markets would crash. Alan Greenspan has admitted before that the Federal Reserve cannot be overruled by any other agency of the United States government ( see video http://www.youtube.com/watch?v=pVmxQsvj6lo&feature=related ). The bill has already attracted over 282 House lawmakers as cosponsors http://blogs.wsj.com/economics/2009/08/31/what-would-a-federal-reserve-audit-show/ and there is supposed to be a decision this October. I wonder what will happen.