"Audit the Fed" Dies But Doesn't Really Die
After much lip-flapping over the dangers of exposing the Fed's top secret monetary policy thought process to ignorant outsiders, opponents of a full Fed audit have gotten their wish and killed Audit the Fed as we knew it.
Don't worry, it's not quite dead.
Plan for Congressional Audits of Fed Dies in Senate (WSJ):
Last-minute maneuvering in the Senate allowed the Federal Reserve to sidestep legislation that would have exposed its interest-rate decision-making to congressional auditors.
Pressure from the Obama administration led Senate lawmakers to alter a provision pushed by Sen. Bernie Sanders (I., Vt.) that was gaining momentum despite opposition from the Treasury and the Fed. It would have largely repealed a 32-year-old law that shields Fed monetary policy from congressional auditors.
The compromise, endorsed by Senate Banking Committee Chairman Christopher Dodd (D., Conn.) and the Treasury, would require the Fed to disclose more details about its lending during the financial crisis. It would also require a one-time audit of those loans and a one-time review of Fed governance. A formal vote was pushed back until next week.
Thursday's Senate showdown came after senators on the left and right joined forces to support Mr. Sanders' provision.
"At a time when our entire financial system almost collapsed, we cannot let the Fed operate in secrecy any longer," Mr. Sanders said. "The American people have a right to know."
But Fed Chairman Ben Bernanke, while insisting on a commitment to "openness" at the Fed, said in a letter to Congress the Sanders measure would "seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation."
Gee, would Bernanke feel seriously threatened because he is smart enough to know that if we were to crack open his secret diary we'd discover that it's been HIM stoking inflation and manipulating interest rates?
Anyway, we'll never get to crack into monetary policy (just a guess) but that's probably for the best; the more we pick at the Fed, the more we expose their weaknesses to foreign governments or central banks who might like to manipulate the precarious position our own central bank is in. It's a strategic move, and those sorts of moves (some of the shit you can find on the Fed's balance sheet, that is) are exposed if the people of the United States keep demanding to see what's up behind that curtain. It's much like if we demanded to see every Goldman Sachs trade for the last two years; their enemies (who number many as of now) could obviously identify trading patterns, weaknesses, exposed positions, etc etc. So no wonder Zimbabwe Ben is shaking in his brown socks, that's some scary shit.
Out there. Naked. Betrayed by the host, the parasite has no choice but to die. So duh, he's freaking out.
Perhaps Zimbabwe Ben can sleep well tonight knowing his homie Chris Dodd's dumb idea will prevail instead. The GAO said in 1993 it specifically does not want the responsibility to thoroughly audit the Fed's monetary policy, so they can sleep well too.
Meanwhile, the rest of us can fuck off.