â¢Bernanke's Clout in House Will Be Tested as Panel Votes on Audit Measures http://www.bloomberg.com/apps/news?pid=20601087&sid=aVoHrJp0jQ98&pos=6 By Scott Lanman "So I'm sitting there, and Blankfein comes up to me and shoves payola right into my pocket, right in front of everyone." Nov. 19 (Bloomberg) -- The House Financial Services Committee will consider today how much to expand audits of the U.S. central bank in a test of Federal Reserve Chairman Ben S. Bernankeâs clout among lawmakers. Panel members will vote on a Democratic proposal to retain a ban on audits of Fed interest-rate decisions. Approval would deal a blow to Representative Ron Paul, the Texas Republican who introduced a bill with 300 cosponsors that would allow audits of interest-rate decisions, a step Bernanke opposes. Advancing the Democratic measure would be a victory for Bernanke as the Fed faces the biggest threats to its authority and independence in five decades. Lawmakers are seeking greater transparency for the Fed and limits on its powers, saying lax regulation by the central bank helped trigger the financial crisis. âCongress created an independent Federal Reserve with a group of board members and bank presidents who have very long terms and a whole culture of independence from politics,â Alice Rivlin, a former Fed vice chairman, said in a Bloomberg Radio interview yesterday. âItâs very important, I believe, to preserve that.â Representative Barney Frank, the Massachusetts Democrat who heads the committee, said the panel would take up Fed audit proposals today during debate on legislation to create a council of regulators to monitor risks to the financial system. Todayâs session in the panel begins at 9 a.m. in Washington. âSubstantial Increaseâ Frank told reporters yesterday that he has âno interest in guessingâ whether the more limited audit amendment backed by Representative Mel Watt of North Carolina has the votes to be approved. âThere will be a substantial increase in auditing,â Frank said. âExactly how much will be voted on.â Should an audit measure be attached to the legislation, the main bill would face a vote by the committee. It then must be approved by the House and Senate and signed by President Barack Obama to become law. The amendment to be offered by Watt, who chairs a subcommittee on U.S. monetary policy, would limit Government Accountability Office audits of Fed emergency-loan programs to their operations, excluding decisions and internal talks about the facilities. Identities of borrowers may be released a year after the programs end. Wattâs plan has more limits than a proposal unveiled last week by Senate Banking Committee Chairman Christopher Dodd. Paul and Representative Alan Grayson, a Florida Democrat, have drafted a competing measure for broader Fed audits, which would exclude only any unreleased transcripts or minutes of Fed policy meetings. It also says the legislation shouldnât be construed as interfering in monetary policy. Monetary Policy Bernanke said in July that the Paul audit bill could result in lawmakers issuing subpoenas over potential decisions to raise interest rates. âI donât think the American people want Congress running monetary policy,â he said. The central bank chairman said independence from political interference in setting interest rates produces âmuch better resultsâ for the economy. âWe are very, very sensitive to this issue,â Bernanke said at the televised forum in July. Congress is considering legislation stripping the Fed of some powers, including its consumer protection authority, and giving it to a Consumer Financial Protection Agency. The House panel also will consider a measure from Paul and Grayson requiring the Treasury secretary to sign off on Fed decisions to swap currency with other central banks. Grayson said yesterday thereâs a need for âsome accountabilityâ in the actions. Dollar Swaps The Fedâs dollar swaps, begun in 2007 to ease banksâ funding difficulties outside the U.S. during the financial crisis, reached a high of $583.1 billion in December 2008 and have since shrunk to $29.1 billion. In addition to Treasury approval, the Grayson-Paul measure would require separate sign-off from at least five Fed governors. Currently, such swaps are subject to approval from the Federal Open Market Committee, which includes governors and regional Fed presidents. Paul, who wrote a best-selling book this year called âEnd the Fed,â said last month that his audit bill had been âguttedâ by Watt while moving toward a vote in the Democratic- controlled House. Watt responded that âwe donât want to have politicians second-guessing the Fed on monetary policyâ and said Paul was âexaggerating.â Wattâs draft measure allows for audits of Fed operations including supervision of banks, bailouts of individual companies and check-clearing functions. Avoiding Fraud For Fed emergency programs accessible to a group of companies, such as the commercial-paper facility, the GAOâs audits would be limited to ensuring that the programs are operating according to Fed procedures and avoid risk and fraud. The GAO would be barred from auditing, reviewing or making recommendations on the Fedâs decisions to create or terminate a facility, its terms and conditions and any âdeliberations, discussions or communications among or betweenâ Fed officials and employees, Wattâs proposal says. It also doesnât permit GAO audits of monetary policy. Watt said in a letter to colleagues that his plan will âprovide transparency of the Fedâs financial operations that will be completely unprecedentedâ without interfering with monetary policy. Frank said this week the full House will consider his regulatory overhaul legislation in December. Dodd, a Connecticut Democrat, plans to hold a committee meeting today to discuss financial-overhaul legislation. To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net Last Updated: November 19, 2009 00:01 EST
Here's hoping. I have my doubts, though, as the corrupt politicians on this board will no-doubt protect their banking masters until we can throw them out next fall.
Unfortunately, this has morphed into something much weaker than Ron Paul intended. But it's better than nothing.