Senate votes 96-0 to audit the Fed

This momentum to audit the Federal Reserve is long-overdue, after months of debate. If our election system involved public financing, the debate would have lasted five minutes.

Now it’s time to reconcile the House and Senate bills, then let the sun shine in. It’s time to shine an especially bright light on the recipients of the the Fed’s largess, and this will information must be produced pursuant to the Senate bill. Let’s just hope that the audit is meaningful and thorough.

Speaking of which, it’s time to turn a sharp eye to the roll the Wall Street bond rating companies played in the meltdown. After all, how could it be that so many sub-prime mortgage-backed securities were so highly rated, despite strong evidence to the contrary? We’re now seeing good momentum to reform the practices of these bond raters too:

A critical amendment to the Wall Street reform bill being debated in the Senate this week picked up a key Republican backer Tuesday. The amendment, sponsored by Sen. Al Franken (D-Minn.), would end the practice of banks choosing which credit rating agency they hire to rate a particular offering. Often, banks will ask raters for a preliminary review, allowing them to pick the rater most likely to look favorably on whatever bundle of products the bank wants to sell to investors.

Share
Tags: ,

Erich Vieth

Erich Vieth is an attorney focusing on civil rights (including First Amendment), consumer law litigation and appellate practice. At this website often writes about censorship, corporate news media corruption and cognitive science. He is also a working musician, artist and a writer, having founded Dangerous Intersection in 2006. Erich lives in St. Louis, Missouri with his two daughters.

This Post Has 2 Comments

  1. Avatar of Erich Vieth
    Erich Vieth May 11, 2010 Reply

    Alan Grayson sent "me" the following email today:

    The Senate just voted, 96-0, to audit the Federal Reserve. Soon, we will know what the Federal Reserve did with the trillions of dollars that it handed out during the financial crisis.

    A few months ago, such a vote would have been unthinkable. One senior Treasury official claimed he would fight to stop an audit 'at all costs'. Senator Chris Dodd predicted that an audit would spell economic doom, while Senator Judd Gregg attacked accountability for the Fed as "pandering populism".

    Today, both the Treasury Department and Senator Dodd support this amendment. As for Judd Gregg, he was just on the floor of the Senate discussing — of all people — 19th century populist Presidential candidate William Jennings Bryan.

    What happened?

    People Power is what happened. We built a coalition of people on the right and the left, ordinary citizens and economists, ex-regulators and politicians, all with one question for which we demanded an answer: "What happened to our money?"

    No longer can Ben Bernanke get away with saying, "I don't know."

    Now, we're going to know who got what, and why.

    Releasing this information will show that the Federal Reserve's arguments for secrecy are — and have always been — a ruse, to cover up the handing out of hundreds of billions of dollars like party favors to the Wall Street favorites who brought the American economy to the brink of ruin.

    But our work isn't quite done. The Senate audit provision isn't as strong as what we passed in the House. The Senate provision has only a one-time audit, whereas what we passed in the House would allow audits going forward. There will be a conference committee that will merge the provisions from the two bills.

    The need for audits and oversight over Fed handouts going forward is great. The financial crisis isn't over, and neither are the Fed's secret bailouts. Earlier this week, the Federal Reserve announced it was going underwrite the Greek bailout by lending dollars to the central banks of Europe, England, and Japan. The loans may never be paid back, the Fed accepts the risk that the dollar will strengthen in the meantime, and the interest rate charged by the Fed is very likely at below-market rates. So such loans are in effect just a subsidy, to bail out foreigners.

    The Fed has not been chastened. It is bolder and more of a rogue actor than ever. It's clear that without full audit authority going forward, the Fed will continue to give out "foreign aid" without Congressional or even Executive permission.

    And it will do so in secret.

    So we will be fighting on to get a full audit from the conference committee.

    But let's not lose sight of what we have accomplished so far – real independent inquiry into the Fed, and its incestuous relationships with Wall Street banks. For the first time ever.

    Our calls, emails, lobbying, blogging, and support really mattered. We made it happen.

    Today, we beat the Fed.

    Courage,

    Alan Grayson

Leave a Reply