Strap on the tin foil hat, kids, we're delving into some lovely Ron Paul goodness.
The witness testifying in favor of HR 1207 made some very strong points, which was no surprise considering the bill is simply common sense. It was also no surprise that the witness testifying against the bill had no good arguments as to why a full audit should not be conducted promptly. He attempted to make the case that the fed is already sufficiently accountable to Congress and that the current auditing policy is adequate. The fact is that the Fed comes to Congress and talks about only what it wants to talk about, and the GAO audits only what the current laws allow to be audited. The really important things however, are off limits. There are no convincing arguments that it is in the best interests of the American people for anything the Fed does to be off limits.
It has been argued that full disclosure of details of funding facilities like TALF and PDCF that enabled massive bailouts of Wall Street would damage the financial position of those firms and destabilize the economy. In other words, if the American people knew how rotten the books were at those banks and how terribly they messed up, they would never willingly invest in them, and they would fail. Failure is not an option for friends of the Fed. Therefore, the funds must be stolen from the people in the dark of night. This is not how a free country works. This is not how free markets work. That is crony corporatism and instead of being a force for economic stabilization, it totally undermines it.
If the Fed gave its actual arguments against a full audit, they would not have mentioned anything about political independence or economic stability. Instead they would admit they don’t want to be audited because they enjoy their current situation too much. Under the guise of currency control, they are able to help out powerful allies on Wall Street, in exchange for lucrative jobs or who-knows-what favors later on. An audit would expose the Fed as a massive fraud perpetrated on this country, enriching a privileged few bankers at the top of our economic food chain, and leaving the rest of us with massively devalued dollars which we are forced to use by law. An audit would make people realize that, while Bernie Madoff defrauded a lot of investors for a lot of money, the Fed has defrauded every one of us by destroying the value of our money. An honest and full accounting of how the money system really works in this country would mean there is not much of a chance the American people would stand for it anymore.
Sorry, Dr Paul, but an audit would expose nothing.
See, this is how accounting works:
If the rules say 1 plus 1 equals 15 bazillion, then 1 plus 1 equals 15 bazillion, even if logic dictates that 1 plus 1 should be 2.
So in the case of Federal Reserve accounting, you have a demonic hybrid of governmental, GAAP, and Bizarro World reconciliation. How in the hell could any auditor make sense of this labyrinth of madness? (see also my July 15th You Want to Audit the Fed. But Why?)
And then there's this:
In traveling around the great wide Intarwebz chasing around the CPAs (since that's my job and all), I found the greatest, most enlightening document evar.
And I thought government accounting was confusing! No, dude, you haven't seen Federal Reserve accounting.
WTF doesn't even do it justice. It's 325 pages of pure unadulterated what.the.fuck.OMG and if you've got an extra 14 hours to blow, take a peek!
Jr Deputy Accountant humbly presents for your reading pleasure:
Financial Accounting Manual for Federal Reserve Banks
Xanax recommended prior to reading. Of course, we already knew the Fed prefers the "WTF method" of accounting (see my April 24 Stress Test Paper Shows Fed Prefers "WTF" Accounting Rules, Dropping LSD) but wow. Just wow.
Hey, Fed boys, I hope you've got some truly special CPA savants on your squad because this is an absolute load of bullshit.
It doesn't stop at the Fed either, I mean, that's sort of what one would expect when the agency in question is the one issuing the money that the regular old vanilla accountants need to account for, right?
Research papers your thing? Great, mine too:
This paper addresses whether Federal Reserve Board accounting requirements are sufficiently pervasive to create regularities in government overnight repurchase agreement (repo) rates. US bank settlement regulations allow overnight government repos as substitutes for Federal (Fed) funds. We find that overnight government repos exhibit rate changes and variance regularities consistent with regularities identified in the Fed funds market, which have been shown to result directly from the Federal Reserve regulations and accounting policies governing the US bank settlement process. Thus, we conclude that the overnight government repo rates are influenced in a similar manner by regulatory rules. However, since the rate changes are not large economically, the influence of regulatory accounting practices does not violate the premise of an efficient market.
Oooh, great read.
Anyway, point being, it's bullshit. We're going to have to borrow Hank Paulson's bazooka if we're going to get anywhere with this thing.
Money laundering is still money laundering whether or not the ones doing the laundering are in charge.
I also recommend my July 24th Leave the Federal Reserve Alone (No, Serious). Why leave them alone? Because they are pretty much going to end up tearing themselves up if they keep it up at this rate. Go, boys, go!!