Audit the Fed is Trendy Again
Doesn't matter how you feel about it, someone is slipping on a rubber glove and getting up the Fed's ass. It appears to be cool again after several weeks of not a peep because, well, financial reform is trendy, I guess, and it's coming whether they (or we) like it or not.
Separately on Thursday, the Senate moved closer to approving a proposal to require a one-time audit of the Federal Reserve’s response to the financial crisis and to force the central bank to disclose the recipients of more than $2 trillion in aid, including the bailouts of big banks.
The proposal, by Senator Bernard Sanders, independent of Vermont, gained momentum even as Republicans and Democrats delayed a vote on it until next week.
Despite the delay, the amendment by Mr. Sanders requiring the audit appeared to have enough support among senators in both parties to win adoption easily.
The White House and the Fed had opposed the original proposal by Mr. Sanders, which would have allowed additional audits of the Fed. A modified proposal from Mr. Sanders appeared to address those concerns, but it would still force the Fed to disclose information that it had maintained was confidential.
The proposal would require the federal Government Accountability Office to conduct a “one-time audit of all loans and other financial assistance provided during the period beginning on Dec. 1, 2007 and ending on the date of enactment of this Act” under a number of programs the Fed used to respond to the near collapse of the financial system.
The amendment states that the audit “not interfere with monetary policy,” addressing a concern raised by the Obama administration and the Fed.
Officials said the proposal would expand on changes made to the Fed in 1978, which subjected much of its operations to regular auditing by the accountability office but explicitly excluded monetary policy.
To make sure everyone is clear, the GAO already audits the Fed (I use the term loosely, as always, since the Fed has its own financial reporting handbook and therefore lies somewhere outside of the effective scope of any "audit" IMHO), it just can't get its paws on any of the monetary policy stuff. Why would it need to? What has the GAO ever found digging around at the Fed anyway? Though the issue has gained some traction of late, the argument to audit the Fed is certainly not a new one.
The Fed is really helpful and explains the function of the GAO in their business:
Since the Federal Reserve has considerable discretion in carrying out its responsibilities, to whom is it accountable?The suspicion is that the Treasury and White House oppose a full Fed audit because it will somehow implicate them as well but who would make such wild accusations about their motivation? Surely not I.
The Federal Reserve's ultimate accountability is to Congress, which at any time can amend the Federal Reserve Act. Legislation requires that the Fed report annually on its activities to the Speaker of the House of Representatives, and twice annually on its plans for monetary policy to the banking committees of Congress. Fed officials also testify before Congress when requested.
To ensure financial accountability, the financial statements of the Federal Reserve Banks and the Board of Governors are audited annually by an independent outside auditor. In addition, the Government Accountability Office, as well as the Board's Office of Inspector General, can audit Federal Reserve activities.
Are the Federal Reserve System and Reserve Banks ever audited?
The Board of Governors, the Federal Reserve Banks, and the Federal Reserve System as a whole are all subject to several levels of audit and review. Under the Federal Banking Agency Audit Act (enacted in 1978 as Public Law 95-320), which authorizes the Comptroller General of the United States to audit the Federal Reserve System, the Government Accountability Office (GAO) has conducted numerous reviews of Federal Reserve activities. In addition, the Board's Office of Inspector General (OIG) audits and investigates Board programs and operations as well as those Board functions delegated to the Reserve Banks. Completed and active GAO reviews and completed OIG audits, reviews, and assessments are listed in the Board’s Annual Report (before 2002, the reviews were listed in the Board's Annual Report: Budget Review).
The Board's financial statements, and its compliance with laws and regulations affecting those statements, are audited annually by an outside auditor retained by the OIG. The financial statements of the Reserve Banks are also audited annually by an independent outside auditor. In addition, the Reserve Banks are subject to annual examination by the Board. The Board's financial statements and the combined financial statements for the Reserve Banks are published in the Board's Annual Report.