The House oversight committee voted Wednesday to demand a broad audit of the Federal Reserve system by congressional investigators – a major move lawmakers said is designed to bring accountability to the murky workings of the independent board.
The bill was sponsored by Rep. Ron Paul, the Texas Republican who turned the push for an audit into a powerful campaign slogan and whose criticism of the Fed’s monetary policy drew hundreds of thousands of voters into the political process.
It passed by voice vote, signaling the growing sense among lawmakers that the time has come for a full review. Committee members said they hope for a vote in the full House next month, and the legislation has been sponsored by 263 members, virtually assuring its passage.
“Clearly the Fed must be made too big to fail, and too big to fail requires a considerable amount of oversight,” said Rep. Darrell E. Issa, California Republican and chairman of the committee.
Federal law right now specifically prohibits such a broad audit, and opponents fear undermining the independence of the Federal Reserve.
The bill would direct the Government Accountability Office to complete a broad audit that would presumably include a peek at the Fed’s decision-making and many of its lending policies.
The committee defeated an amendment sponsored by Rep. Elijah E. Cummings, Maryland Democrat, that would have prevented auditors from getting a look at internal board-discussion minutes.
“This whole idea about ‘Well we can’t touch the Fed‘ is baloney,” said Rep. Dennis J. Kucinich, Ohio Democrat. “We have to be able to have control over the Fed because it’s controlling every aspect of our economy.”
The Federal Reserve consists of a board of governors and 12 regional banks, which act as lenders of last resort to the country’s banking system.
Last year, a more limited audit by GAO found the Fed repeatedly invoked emergency authority to expand its lending during the Wall Street crisis in 2008 and 2009, including major loans to prop up the housing market.
The audit also found that the Federal Reserve Bank of New York, which had a major role in the lending, did not have sufficient controls to prevent conflicts of interest for its employees.
Mr. Paul has pursued an audit for years, and said the bill’s time has come.
“The Fed’s purchases of dubious assets from favored Wall Street institutions; its lending of hundreds of billions of dollars to foreign governments and central banks; and the prospect of further quantitative easing and European bailouts underscore the critical need for transparency,” he said in a statement.
If the bill clears the House it will still need a vote in the Senate – but Senate Majority Leader Harry Reid, Nevada Democrat, has spoken approvingly of an audit in the past.