[GATA] 'Waterloo for Fed secrecy' as committee OKs Paul's audit bill
Gold Anti-Trust Action Committee
org> 'Waterloo for Fed secrecy' as committee OKs Paul's audit bill
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Submitted by cpowell on 07:02PM ET Friday, November 20, 2009.
Section: Daily Dispatches<http://www.gata.org/node/8059>
Fed Beaten: Bill To Audit Federal Reserve Passes Key Hurdle
By Ryan Grim Huffington Post, New York Thursday, November 19, 2009
http://www.huffingtonpost.com/2009/11/19/fed-beaten-bill-to-audit_n_3645...<h
ttp://www.huffingtonpost.com/2009/11/19/fed-beaten-bill-to-audit_n_364546.htm
l>
In an unprecedented defeat for the Federal Reserve, an amendment
to audit the multi-trillion-dollar institution was approved by the
House Finance Committee with an overwhelming and bipartisan 43-26
vote on Thursday afternoon despite harried last-minute lobbying
from top Fed officials and the surprise opposition of Chairman
Barney Frank, D-Mass., who had previously been a supporter.
The measure, cosponsored by Reps. Ron Paul, R-Texas, and Alan
Grayson, D-Fla., authorizes the Government Accountability Office
to conduct a wide-ranging audit of the Fed's opaque deals with
foreign central banks and major U.S.
financial institutions. The Fed has never had a real audit in its
history and little is known of what it does with the trillions of
dollars at its disposal.
The amendment expressly blocks Congress from interfering with the
independence of monetary policy decision-making, but opponents of
the measure said that the political pressure would inevitably follow.
A desperate, last-minute attempt to thwart the move came in the
form of an amendment championed by Rep. Mel Watt, D-N.C., and
described by its supporters as more reasonable. On Tuesday, however,
the Huffington Post reported that, on a close reading, his amendment
would in fact decrease transparency at the Fed by adding additional
restrictions.
Backers of the Watt amendment pressed their case on Wednesday by
sending a letter from a "political cross-section of prominent
economists" backing a measure like Watt's. HuffPost reported,
however, that those economists might well have be prominent, but
they certainly aren't a "political cross- section." Seven of the
eight economists in question have extensive connections to the Fed
-- and half of them are currently on the Fed payroll. Those
affiliations were not noted in the letter.
The playbook in Washington often goes like this: When a measure
that threatens the establishment builds enough momentum that it
must be dealt with, it is labeled as "unserious." The Washington
Post editorial board, true to the script, called Paul's measure "an
unserious answer to a serious question."
And it particularly rankles the center that a pair of "wingnuts"
are behind a successful effort to challenge the prevailing order.
Step 2 is for a "serious" compromise to be offered. In this case,
it was Watt's amendment. But by the time the vote was called Thursday
afternoon, committee members had seen through his measure, recognizing
that it was not a compromise effort to bring real transparency to
the Fed but an attempt to further shut the the doors.
"The Watt amendment will fully obliterate everything 1207" (Paul's
measure) "is intended to do," Paul said during Thursday's debate.
For anyone remaining confused, the debate was further clarified by
the central bank itself: Federal Reserve Vice Chair Don Cohn and
General Counsel Scott Alvarez spent much of the day calling committee
members, urging them to oppose the Paul-Grayson amendment in favor
of Watt's, a member of Congress who asked for confidentiality told
HuffPost.
Paul's opponents also placed a letter from former Fed chairmen Alan
Greenspan and Paul Volcker on the seats of every committee member.
Such a move is in violation of House rules and Grayson was able to
have the letters removed.
As the day wore on and support held for the Paul-Grayson side, the
Fed still could hope that both would pass. Watt's amendment, which
included additional restriction, would then trump Paul's.
To counter that possibility, the Paul-Grayson side moved to fully
replace Watt's amendment with theirs, leaving only one amendment
to vote on. The motion carried and the amendment passed in a
landslide.
The GOP broadly backed the amendment, though Frank chided them for
finding their love of Fed transparency only after they lost power,
noting that Paul has been introducing some version of the measure
since 1983.
Frank said he was opposing the Paul amendment because it could be
perceived as influencing monetary policy, which can have inflationary
pressure. "Perception is very important in monetary policy," said
Frank.
He urged a no vote, yet 15 Democrats bucked him, voting with Paul.
Key to winning Democratic support was a letter posted early Thursday
from labor leaders and progressive economists. The letter, organized
by the liberal blog FireDogLake.com, called for a rejection of the
Watt substitute and support for Paul.
Grayson was able to show Democratic colleagues that the liberal
base was behind them.
"Today was Waterloo for Fed secrecy," a victorious Grayson said
afterwards.
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