The Senate could be voting as early as tomorrow on an amendment introduced by Sen. Bernie Sanders (I-VT) that would provide a much-needed dose of transparency at the Federal Reserve. The amendment—which has been co-sponsored by over a dozen Senators from both sides of the aisle, and is modeled after the Paul-Grayson legislation that passed the House in December—would allow the Government Accountability Office (GAO) to audit some of the Fed’s most important lending activities, including the unprecedented actions it took in response to the financial crisis.
Sen. Sanders spoke on the Senate floor a few hours ago about the crucial changes his amendment would make to the financial regulatory reform legislation introduced by Senate Banking Chair Christopher Dodd (D-CT) and Senate Agriculture Chair Blanche Lincoln (D-AR).
- The Dodd-Lincoln bill would only allow the GAO to audit certain lending facilities established under the Fed’s 13(3) emergency authority; the Sanders amendment would allow the GAO to audit a much broader range of programs, including the Fed’s $1.25 trillion mortgage-backed securities purchase program. However, the Sanders amendment makes clear that the GAO cannot do anything to interfere with the Fed’s ability to set monetary policy.
- The Dodd-Lincoln bill would prohibit the GAO from disclosing to Congress or the public the names of the firms that accessed the Fed’s lending facilities, the amounts borrowed, or the lending terms. In fact, the GAO wouldn’t be allowed to fully release this information unless the Fed decides to shut down the credit facility altogether. The Sanders amendment, on the other hand, would require the Fed to post this information on its website within a month after the bill passes, giving Congress and taxpayers a crucial insight into the firms that accessed over $2 trillion in emergency assistance during the financial crisis.
The Wall Street Journal reports that Fed and administration officials have announced they will “fight to stop [the Sanders amendment] at all costs.” But despite the administration’s protests, we’re not convinced that a GAO audit of the Fed’s non-monetary functions will somehow jeopardize the Fed’s long-standing political independence. On the contrary, Congress and the American people have every right to know about the extraordinary actions the Fed took to stabilize the financial system. This is why POGO and other groups from across the political spectrum have joined together in calling for a thorough GAO audit of the Fed.
If you support real transparency at the Federal Reserve, please call your Senators today and tell them to vote YES on the Sanders amendment.
We would only add one caveat, which was highlighted by a commenter on our blog a few months ago:
GAO currently has right around 3000 employees. Attrition is currently about 10% a year, with at least 330 people planning to leave in the next two years for sure (Based on a voluntary survey of all GAO employees of which 2220 participated.) Along with the other additional work GAO has been tasked with, with respect to the TARP, GAO is currently overwhelmed. GAO's audits, controls, and processes mean that on average each report takes 9 months to complete. The TARP legislation asks for a 60 day turn around [note: the Sanders amendment calls for a 12-month turnaround], which is really way too fast. People are burning out, and I am not sure that asking GAO to audit the FED will do anything but overwhelm the system further.
One agency cannot be responsible for all of our good government. We need to either:
1. Expand GAO drastically,
2. Make the IGs more robust, and/or
3. Congress and the public will have to understand that GAO's work will not be as reliable as it has been in the past.
Any legislation requiring an audit of the Fed must also provide the GAO with the staffing and resources it needs to get the job done.
-- Michael Smallberg