What exactly is wrong with transparency at the Federal Reserve?

[Paranormal Inquirer]

I'm not a libertarian who believes that the Federal Reserve is the cause of all of our economic problems since it was created in 1913. However, that does not necessarily mean I oppose Ron Paul's HR 1207 bill. While his bill is imperfect, Barney Frank did help by adding an amendment to it that would hold the findings of the audits for 6 months so that it wouldn't affect the market confidence.

If you want the progressive case for an audit, please read this: http://www.guardian.co.uk/commentisfree/cifamerica/2009/may/25/federal-reserve-bailout-transparency

I fear that many fellow skeptics have only looked at this as just another conspiracy-driven idiotic bill that will serve no decent purpose, even though that's not the case at all. Sure, many who support this bill are nuts, but people can support the same thing for different reasons; the end result, however, is more accountability at the Fed for the loans they gave out to the banks. Everyone wins.

 

[DC]

thats the problem when a loonatic has a good idea, people see the loonatic but not the idea.

 

[WildCat]

the end result, however, is more accountability at the Fed for the loans they gave out to the banks. Everyone wins.

No, the end result is the Fed is no longer an independent organization and we'll have Congress effectively setting monetary policy.

And what could go wrong with that? I'm sure Congress will look to the long term, and not use gimmicks to boost the bottom line just before an election. They're very responsible people.

 

[Thunder]

the Fed is owned by banks. banks are setting rules for banks.

is this not a conflict of interest?

 

[WildCat]

the Fed is owned by banks. banks are setting rules for banks.

is this not a conflict of interest?

No, it's a mistatement of facts.

 

[TriskettheKid]

No, the end result is the Fed is no longer an independent organization and we'll have Congress effectively setting monetary policy.

And what could go wrong with that? I'm sure Congress will look to the long term, and not use gimmicks to boost the bottom line just before an election. They're very responsible people.

This, but with more sarcasm and wit.

 

[Travis]

I'm not a libertarian who believes that the Federal Reserve is the cause of all of our economic problems since it was created in 1913. However, that does not necessarily mean I oppose Ron Paul's HR 1207 bill. While his bill is imperfect, Barney Frank did help by adding an amendment to it that would hold the findings of the audits for 6 months so that it wouldn't affect the market confidence.

If you want the progressive case for an audit, please read this: http://www.guardian.co.uk/commentisfree/cifamerica/2009/may/25/federal-reserve-bailout-transparency

I fear that many fellow skeptics have only looked at this as just another conspiracy-driven idiotic bill that will serve no decent purpose, even though that's not the case at all. Sure, many who support this bill are nuts, but people can support the same thing for different reasons; the end result, however, is more accountability at the Fed for the loans they gave out to the banks. Everyone wins.

The Fed and it's workings already are transparent only the lunatic fringe think it isn't which is precisely why these initiatives are rightly derided as useless and unnecessary. They may as well as passed a bill that makes the Department of Justice part of the Executive Branch just because some lunatics out there think it's really being controlled by an evil Jesuit cabal or something.

 

[Neally]

the Fed is owned by banks. banks are setting rules for banks.

is this not a conflict of interest?

The regional Fed banks are owned by banks, but the FED itself is not owned by banks.

 

[Paranormal Inquirer]

No, the end result is the Fed is no longer an independent organization and we'll have Congress effectively setting monetary policy.

And what could go wrong with that? I'm sure Congress will look to the long term, and not use gimmicks to boost the bottom line just before an election. They're very responsible people.

Can you please explain to me how exactly an audit that would only reveal to whom the Fed is providing cheap credit to would lead to Congress setting monetary policy?

I'm with you 100% in that Congress eliminating the Fed's independence on monetary policy is dangerous, but I don't see how this bill would lead to this. (And I'm talking about the Barney Frank amended version).

 

[Paranormal Inquirer]

The Fed and it's workings already are transparent only the lunatic fringe think it isn't which is precisely why these initiatives are rightly derided as useless and unnecessary. They may as well as passed a bill that makes the Department of Justice part of the Executive Branch just because some lunatics out there think it's really being controlled by an evil Jesuit cabal or something.

From the article I posted (emphasis mine):

The congressional oversight panel, led by Elizabeth Warren, has frequently complained that the Treasury has not always been altogether forthcoming in providing information about its lending practices under the Tarp. However, there is at least a public paper trail. We can find out how much money each bank received and under what terms.

By contrast, there is no public paper trail for the Fed's loans, even though it has more than three times as much money outstanding as does the Treasury through the Tarp. The Fed has only provided aggregate information on the amount of loans in each of its various lending programs, and general information on the terms of the loans and the types of collateral received.

However, it is not possible to find out in detail how much money Goldman Sachs borrowed, for example, at what interest rate, and which assets it posted as collateral. The Fed has explicitly refused to make information about specific borrowers public. In fact, the inspector general who has the responsibility for overseeing the Fed told congress that she does not have this information. Apparently the Fed doesn't even trust its inspector general with information on its lending practices.

It is difficult to understand the rationale for this secrecy. There may be times where it is necessary for America's central bank to lend money to a bank without immediately making the information public in order to avoid a panic. However, it is difficult to understand why this information cannot be made available weeks or even months later. After all, this money does not belong to the Fed – it belongs to us.

The proposal for a GAO audit of the Fed is a first step towards reasserting democratic control over this institution. In many respects, the Fed has more direct control over the direction of the economy than the president or congress, yet it carries through its actions largely outside of the public's view.

Furthermore, it is structured so that the banks have a hugely disproportionate influence over the Fed's actions. The Fed's 12 district bank presidents are appointed through a process dominated by the banks within each district. These 12 presidents sit on the Federal Open Market Committee (FOMC), the Fed's key decision-making body on monetary policy, far outnumbering the seven governors who are appointed through the democratic process. (Only five of the 12 bank presidents are voting members of the FOMC. The president of the New York Fed is always a voting member. The other 4 voting positions rotate among the other 11 districts.)