Fed News Friday: What the Dodd-Frank Audit Told Us
October 7th, 2011
Earlier this week the Federal Reserve Bank came under closer scrutiny by both houses of Congress. On one end of the Capitol complex, Fed Chairman Ben Bernanke testified to a joint committee on the rough economic outlook, telling members that the nation’s central bank is willing to do its part to avert more damage to the economy by loaning out dollars to stimulate economic growth, and urging them to continue spending and stimulus programs to dig the economy out of a rut.
That same day on the other end of the Capitol, the House Subcommittee on Domestic Monetary Policy, chaired by Congressman Ron Paul (R-TX), held a hearing on Fed transparency and the startling results of the one-time, limited Fed audit inserted as a provision to the Dodd-Frank Wall Street reform and consumer protection bill. The Federal Reserve has been “doing its part” alright:
At the height of the financial crisis, from 2007 – 2010, the Federal Reserve created over $16 trillion out of thin air and loaned them out at functionally zero percent interest to foreign central banks and big Wall Street banks –no small American banks received any loans, and in his testimony to the joint committee, Ben Bernanke told Senator Bernie Sanders (I-VT) that the Fed would not be lending money to small businesses.
As Davi Barker, another contributor here at the Silver Underground recently noted to our other colleagues and myself, this was the largest single transfer of wealth in human history: funny, you’d think that would be in the news. The one-time audit also revealed shocking conflicts of interest at the Federal Reserve that the public had not been aware of and would not have been without this public review of the Fed’s policies. At the New York Fed, for instance, many employees and contractors were allowed to keep investments in companies that received Fed loans. Think that might be a recipe for corruption?
(Read the results of the GAO’s audit here.)
Republican members at the subcommittee meeting were in agreement: this recent public audit of the Federal Reserve bank should be conducted regularly and even more thoroughly. A top-to-bottom, yearly review of practices and policies at the Federal Reserve bank is a necessary aspect of keeping the bank accountable to the Congress that created it and the people that Congress represents. As Rep. Paul said: “Would it be much of a problem if we were doing this every year?”
It seems to be a big enough problem that we’re not.
(Watch the full hearing on Fed transparency here.)
