Monday, October 12, 2009

Appeal For Support To Audit The US Federal Reserve

Did you know that the Federal Reserve is not a part of the US Federal Government?

Did you know that it is in fact a Private Company?

Did you know that The US Government has little domestic oversight of the US Fed?

Did you know that the US Fed can enter into negotiations with “Foreign” central banks without Federal oversight?

Did you know that the Federal Reserve has never been audited?

The US Government does not own and it does not control the US Fed. Yet the Fed controls the monetary policy of the biggest economy on the planet and has a direct line to the US Treasury Department. The Fed board’s influence extends to and beyond the US Government and as such the Fed has a very big say in the economic health of the Western World. It is in fact the single most powerful organisation influencing world markets. But where are the checks and balances? There are none.

Ron Paul, everybody’s favourite Republican (outside of the US) introduced House Resolution Bill 1207 The Federal Reserve Transparancy Act to the US House of Representatives in February this year urging the Federal Government to bring the Fed under real scrutiny starting with a full public audit of the bank, to be completed before the end of 2010. This is earth shattering stuff, seeing as nobody is even sure who owns the Fed.

Here is the speech Ron Paul gave when he introduced the bill.

Madame Speaker,

I rise to introduce the Federal Reserve Transparency Act. Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar. Since 1913 the dollar has lost over 95% of its purchasing power, aided and abetted by the Federal Reserve’s loose monetary policy. How long will we as a Congress stand idly by while hard-working Americans see their savings eaten away by inflation? Only big-spending politicians and politically favored bankers benefit from inflation.

Serious discussion of proposals to oversee the Federal Reserve is long overdue. I have been a longtime proponent of more effective oversight and auditing of the Fed, but I was far from the first Congressman to advocate these types of proposals. Esteemed former members of the Banking Committee such as Chairmen Wright Patman and Henry B. Gonzales were outspoken critics of the Fed and its lack of transparency.

Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations. While the conventional excuse is that this is intended to reduce the Fed’s susceptibility to political pressures, the reality is that the Fed acts as a foil for the government. Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests.

The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the GAO is prohibited from auditing or even seeing these agreements. Why should a government-established agency, whose police force has federal law enforcement powers, and whose notes have legal tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight? Particularly when hundreds of billions of dollars of currency swaps have been announced and implemented, the Fed’s negotiations with the European Central Bank, the Bank of International Settlements, and other institutions should face increased scrutiny, most especially because of their significant effect on foreign policy. If the State Department were able to do this, it would be characterized as a rogue agency and brought to heel, and if a private individual did this he might face prosecution under the Logan Act, yet the Fed avoids both fates.

More importantly, the Fed’s funding facilities and its agreements with the Treasury should be reviewed. The Treasury’s supplementary financing accounts that fund Fed facilities allow the Treasury to funnel money to Wall Street without GAO or Congressional oversight. Additional funding facilities, such as the Primary Dealer Credit Facility and the Term Securities Lending Facility, allow the Fed to keep financial asset prices artificially inflated and subsidize poorly performing financial firms.

The Federal Reserve Transparency Act would eliminate restrictions on GAO audits of the Federal Reserve and open Fed operations to enhanced scrutiny. We hear officials constantly lauding the benefits of transparency and especially bemoaning the opacity of the Fed, its monetary policy, and its funding facilities. By opening all Fed operations to a GAO audit and calling for such an audit to be completed by the end of 2010, the Federal Reserve Transparency Act would achieve much-needed transparency of the Federal Reserve. I urge my colleagues to support this bill.

The Bill is gaining momentum and people in the US are taking notice and an interest and there are some public campaigns aimed at applying pressure on US Congressmen and Senators to back this Bill.

It is important because the US Fed makes decisions that affect us all, it is directing traffic and nobody is really sure how strong or weak it really is. If Ron Pauls bid succeeds, other central banks would come under pressure to also come under open scrutiny.

So, if you are a reader from the US, please lend your support to 1207 and urge your representatives to do the same. If you are in the UK please sign THIS PETITION on the 10 Downing Street website urging our Prime Minister to publically lend his support to the existing calls for the US Fed to be audited. Please advertise the link on your blogs and social networks and let’s see if we can help Ron Paul and the US Congress open the books on the Fed. Maybe then we can really get a handle on the Global Economic downturn.

This video is of Ron Paul explaining why this is an important bill. He explains it much better than I can.

1 comment:

Blue Eyes said...

Interesting, makes the BoE look transparent in comparison!

I'm not sure that criticising the Fed for "destroying" the currency is up to much, paper money always falls in value over time. That is part of its efficiency as a currency.