Gary North: The Fed on the Defensive
Presented (mostly) without commentary (via Lew Rockwell):
I do not recall this in my lifetime. A majority in the House of Representatives has co-signed H.R. 1207, a bill introduced by Ron Paul to have the Federal Reserve System audited by an independent government agency, the Comptroller General's office.
The bill has been bottled up in committee by Barney Frank, who has insisted that he is doing this in order to better coordinate consideration of the best way to gain greater transparency from the Federal Reserve. He has not said that he favors an independent audit of the FED.
It would be easy for Congressman Frank to hold hearings on the bill. This would allow Dr. Paul to bring in expert witnesses on the FED to make the case for an independent audit. It would get a lot of YouTube play. It would be the first time since the replacement of eccentric Congressman Wright Patman in 1975 as the chairman of the House Banking Committee that the FED has been exposed to anything like serious criticism in Congress. (Patman, an inflationist and a greenbacker, hated the FED. He was chairman of the House Banking Committee, 1965–75.) Congressman Frank has yet to announce hearings.
There was a posting on the DailyPaul site that Frank will hold hearings soon. Someone heard it on the radio. I will believe it when I see the YouTube videos.
The FED in June hired a public relations expert, Linda Robinson, to deal with Congress. She was formerly a lobbyist for Enron. I have little doubt that it was H.R. 1207 that forced the FED into this move.
Now Ron Paul's book, End the Fed, is about to be published. It is expected to become a best-seller. Think about this. There have been books attacking the Federal Reserve System for over ninety years, but they have been written by obscure people who no one in the general public has heard of. They have not sold well. They have not been written by someone who persuaded over half of the House of Representatives to support a bill to audit the FED. They have not been written by someone who once raised over $30 million in a run for President.
This is unprecedented. For the first time in the history of the Federal Reserve System, there are literally millions of people who have heard of the FED and who would like to see it shut down.
There have been academic and investment critics of this or that policy of the FED, most notably Milton Friedman, who criticized the FED for not inflating enough, 1930–33. But there has never been a serious audience ready to listen to arguments on why a system of 12 private banks should oversee monetary policy, and why one of them, the New York Federal Reserve Bank, should execute this policy without having to answer to anyone.
A Fed audit? Pfft, good luck with that. (see my July 15th You Want to Audit the Fed. But Why?) I initially supported the idea of a Fed audit until I realized that cracking open their books is a futile gesture. They make their own accounting rules! How could any agency, independent or otherwise, decode their financial statements if they are coded in the Fed's special accounting?
But it doesn't end there. As most of you already know, no sooner did a judge say the Fed was obliged to share information on the wheres and whens of bailout programs than the decision was put on hold. Worse, it appears to be frozen indefinitely while the Fed formulates its strategy.
The Board of Governors' lawyer insisted that the Board has no knowledge of what the New York FED – its legal agent – really does. The lawyer said, "We don't control the system of record-keeping in New York." She insisted that the Board of Governors just cannot find out what the New York FED did with the money in time to meet the deadline.
Apparently, the Board of Governors, a government agency, has taken seriously Jesus' words regarding charity (alms):
But when thou doest alms, let not thy left hand know what thy right hand doeth: That thine alms may be in secret: and thy Father which seeth in secret himself shall reward thee openly (Matthew 6:3–4).
The two FEDS, the government one and the private one, were surely involved in the charity business, to the tune of a trillion dollars or so. This was a system of handouts on an unprecedented scale.
The Father in Washington has surely rewarded the FED in the past. The FED expects more of the same in the future. But now this pesky lawsuit forces an opening of the books.
Is the lawyer's argument credible? Perhaps the judge will not regard it as credible. So, the FED had another argument. The FED wants her to wait until the case can be heard on appeal. But there was a hitch. The FED did not say when it intends to appeal.
Here is the FED, with a court ruling against it, and with the clock ticking, admitting that it has no date set to file an appeal. Its lawyers apparently had no fall-back position. Is this credible? Of course not.
Fun fact: the book of Matthew contains the first mention of accounting in the Bible.
Again, one must argue here that calling the Board "government Fed" is a bit of a misnomer. Does the FDIC have the luxury of telling Congress to fuck off when questioned about its policies? Can the USDA simply say "I can't tell you where our money goes"? And if the Fed is government, why in the hell are we in perpetual debt to them for issuing our money?
Food for thought.
The pressure is on and the Fed knows it is in the frying pan. It will be interesting to see how they attempt to get off the stove but regardless of how this plays out, I think we can safely say that we have accomplished some level of transparency in bringing the Fed out of the shadows and into the light.
Bet none of their bubble experts saw that one coming either.