Unwashed Masses 1, Fed 0: Sanders Scores
The effort to audit the Fed got a big boost last night when Senator Bernie Sanders reached an agreement with Chris Dodd, the chair of the banking committee. Under the deal, the Government Accountability Office (GAO) would undertake a full audit of the special facilities created by the Fed since December of 2007. GAO would make the findings from its audit available to the Congressional leadership. It would also make most of the details of the Fed's transactions available to the public.
To cope with the economic crisis, the Fed created 13 different special lending facilities. At their peak last year, these facilities had lent out more than $2 trillion. The Fed has only disclosed aggregate data about these facilities, telling us how much each one lent out month by month. It has refused to disclose any information about the specific loans and beneficiaries. This means that we have no way of knowing how much Citigroup, Goldman Sachs or anyone else benefited from these facilities.
Under the terms of the deal, by December 1 of this year the Fed will have posted on its website all the loans that were part of these facilities. Any interested journalist, academic, blogger or generic snoop can read through the data and find exactly how much money Goldman Sachs got, at what interest rate, with what collateral and when they paid it back. This is a big victory.
The Fed had previously argued that disclosing this information would compromise its independence. It complained that the having their borrowings made public would put a stigma on dealing with the Fed, so that banks and other financial companies would be reluctant to use special lending facilities in future crises.
Of course these arguments made no sense. This is why a majority of senators stood behind Sanders and why the House of Representatives attached an audit bill sponsored by representatives Ron Paul and Alan Grayson to its financial reform bill. The basic point is simple: this is our money; we have a right to know what the Fed did with it.
Sanders did make some compromises. The audit has an arbitrary cutoff date of December 2007. The special facilities date from the summer of 2007. It also only has the audit as a one-off proposition, rather than establishing GAO audits of Fed operations as an ongoing principle. The compromise also explicitly exempts open market operations - the Fed's daily buying and selling of short-term assets to control interest rates - from GAO scrutiny.
These concessions are unfortunate, the Fed is a creation of Congress and for that reason it should be subject to the same investigative procedures as any other federal agency, but they certainly are secondary compared with getting a full accounting of the money lent out through the special facilities. It is also important to note that in one very important way the Sanders compromise goes beyond the original Paul-Grayson language. Under the compromise, the information about the lending facilities will be made fully public where everyone can scrutinize it. The original bill would just have this information made available to the relevant congressional committees. They would then have to make a further decision about what information, if any, would be made public.
There has been a long ongoing battle with the Fed over its policy of excessive secrecy. Over the years, Congress has pushed back at efforts to treat the Fed as a holy temple outside of democratic control. It has made progress at holding the Fed accountable through measures like requiring the semi-annual Humphrey-Hawkins testimony by the Fed chair before Congress, the release of full transcripts of Fed open market meetings (with a 5-year lag), and now this public audit of its special facilities. There will be further battles and we have a long way to go before the Fed is as democratically accountable as it should be, but the Sanders compromise is a big step forward.
I love the irony of the vote being delayed so that a Republican Senator from Utah can come back to vote for a Bernie Sanders idea to court favor with the right wing of his own party.
I am sad this was watered down. Ongoing Fed audits should be the ultimate goal. But after these revelations are made and the world doesn't collapse and the Fed continues to make its decisions we'll have an excellent argument for more.
May 7, 2010 8:33 AM | Reply | Permalink
I'm not so sure, destor. I think an audit of what was done during the bailout is entirely appropriate and necessary. But I am wary of giving the idiots in Congress too much say over monetary policy.
Th reason this bill has the support of Republicans is not because it's "populist." Rather, they are licking their chops at the prospect of subjecting yet another independent government agency into a means of furthering destructive right-wing storm troopery. See Court, Supreme.
May 7, 2010 11:01 AM | Reply | Permalink
I view the power to audit as the power to question and report rather than to direct. It's up to the Fed to defend its own independence at that point.
May 7, 2010 11:50 AM | Reply | Permalink
May 7, 2010 12:28 PM | Reply | Permalink
"But you were OK giving them so much say over our individual health care decisions? That doesn't make an awful lot of sense from an intellectual consistency standpoint."
I'm not going to waste a lot of time responding to this nonsense. Let's just say if you can't see the difference between a corporate bureaucracy engaged in reducing expenditures by every means available (i./e., insurance companies) with a board of (mostly)academics, specifically chosen from a variety of ideological backgrounds and tasked with a specific mission to monitor and set the monetary policy of a country, then I'm not sure you're capable of distinguishing intellectual consistency or the lack thereof in any case.
May 7, 2010 12:51 PM | Reply | Permalink
What this highlights most is that you don't have a fucking clue how either the HCR bill worked nor what the basic function of an *AUDIT* is.
But then, if you had a clue about how the HCR bill worked, you wouldn't have supported it. Mindless stupidity is Obama's playground.
May 8, 2010 1:56 PM | Reply | Permalink
Dude, if you think audits can't be used to harass, then it's no wonder you get fired from whatever quasi-auditing job you held previously.
And if I were you, I'd quit arguing that programming accounting software for a claims administrator makes you an expert on health care reform. That's kind of like a chemist for Pfizer arguing that their work experience makes them an expert on pharmaceutical drug abuse policy. It makes you look like a bigger moron than your piss-poor logic skills do.
May 9, 2010 11:28 PM | Reply | Permalink
I am wary of giving the idiots in Congress too much say over monetary policy.
Aren't loans made under these Fed created special facilities (as well as QE purchases) the exercise of fiscal policy which is properly under the jurisdiction of the people's representatives?
May 7, 2010 1:07 PM | Reply | Permalink
In my classification, the correct way to think of pure credit policy is as debt-financed fiscal policy. Why? Well, at the margin, the Fed returns to the Treasury the interest earned on Treasury securities that it holds; so when the Fed sells Treasuries to finance the acquisition of non-Treasury assets such as discount window loans or mortgage-backed securities, the result is just as if the Treasury financed this purchase by borrowing from the public. Goodfriend, Marvin, "Central Banking in the Credit Turmoil: An Assessment of Federal Reserve Practice"
May 7, 2010 1:25 PM | Reply | Permalink
I think that's a good argument. And it's why I'm arguing that a more limited audit role might be preferable than a general one. The tendency toward further politicization of the Fed would not ultimately be good for the country.
May 7, 2010 1:40 PM | Reply | Permalink
Under the terms of the deal, by December 1 of this year the Fed will have posted on its website all the loans that were part of these facilities. Any interested journalist, academic, blogger or generic snoop can read through the data and find exactly how much money Goldman Sachs got, at what interest rate, with what collateral and when they paid it back. This is a big victory.
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The Fed burç uyumu had previously argued that disclosing this information would compromise its independence. It zar falı complained that the having their borrowings made zar falı public would put a stigma on dealing with the burç uyumu Fed, so that banks and other financial companies would be reluctant to use special lending facilities zar falı in future crises.
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Of course these arguments made no sense. This is why a majority of senators stood behind Sanders and why the House of Representatives zar falı attached an audit bill sponsored by representatives Ron Paul and burç uyumu Alan Grayson to burç uyumu its financial reform bill. The basic point is simple: this is our money; we have a right to know what the Fed did with it.
January 25, 2011 1:34 AM | Reply | Permalink
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February 16, 2011 12:53 PM | Reply | Permalink
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March 22, 2011 2:01 PM | Reply | Permalink
Sanders did make some compromises. The audit has an arbitrary cutoff date of December 2007. The special facilities date from the summer of 2007. It also only has the audit as winx izle a one-off proposition, rather than establishing GAO audits of Fed operations as an ongoing principle. The compromise also explicitly exempts open market operations - the Fed's daily buying and selling of short-term assets to control interest rates - from GAO scrutiny.These concessions are unfortunate, the Fed is a creation of Congress and for that reason it should be subject to the same investigative procedures as any other federal agency, but they certainly are secondary compared with getting a full accounting of the money lent out through the special burç uyumu facilities. It is also important to note that in one very important way the Sanders compromise goes beyond the original Paul-Grayson language. Under the compromise, the information about the lending facilities will be made fully public where everyone can scrutinize it. The original bill would just have this information made available to the relevant congressional committees. They would then have to make a further decision about what information, if any, would be made public.
January 25, 2011 1:36 AM | Reply | Permalink
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April 5, 2011 4:01 AM | Reply | Permalink
Are you KIDDING????
Benedict Sanders completely sold the people out!! He accepted essentially the Mel 'Bank of America' Watt language shot down in House Committee by Ron Paul and Grayson -- limiting what can be audited, giving only a one time audit of what the Fed has already agreed to turn over, and completely betraying all who worked so hard to get this passed in the House!
" Bernie Sanders has sold out and has sided with Chris Dodd to gut Audit the Fed in the Senate. His "compromise" is what the Administration and banking interests want - they'll allow the TARP and TALF to be audited, but no transparency of monetary policy decisions,discount window operations or agreement with foreign central banks. We need to take aciton and stop this!
The amendment limits the audit only to emergency lending, the GAO would be barred from looking at the Fed's foreign central bank swaps and its purchasing of mortgage debt from Fannie Mae and Freddie Mac, which is considered part of open market operations and not emergency lending."
Call your Senators and demand the language passed in the House on this point be put into the bill or otherwise refuse to vote for cloture. It isn't as if this were a good bill -- which is why Goldman Sachs WANTS it. (It limits GS's competitors, not GS.)
Absolutely don't CHEER this development!!
The vote has been put over until Tuesday so we have today to deal with this betrayal.
May 7, 2010 10:21 AM | Reply | Permalink
Baker's resided inside the Beltway so long he thinks table scraps are a twelve course dinner.
May 7, 2010 2:01 PM | Reply | Permalink
I love it, someone attacking Baker from the left. Just goes to show, no matter how much you foam at the mouth there will always be someone here who can out-progressive you.
May 7, 2010 7:00 PM | Reply | Permalink
Baker isn't really that far left. He's more consistent than Krugman I guess, but Krugman acts more as an administration-aligned message-force-multiplier rather than as an economist.
I think the fact of Baker defining the edge of "far left" in some minds is a strong indicator that true Liberals have been essentially eradicated from the national discourse. There isn't a single strong-left writer in Josh's stable. His most liberal contributors fall somewhere in the mid-range of KOS and the far right spectrum of FDL. And compared to the true radicals of the 70's (and some of the right wing radicals of today), FDL is full-on center-left. Their "radical" move is to support more progressive primary challengers and to run the occasional pressure ad.
Perspectives have become very warped trying to pretend Obama's Regan-conservative ideology is anywhere near the line of liberal.
May 8, 2010 3:02 PM | Reply | Permalink
I suspect Krugman's and Baker's reputations as leftists is born out of their willingness to regularly challenge the MSM's rhetorical conventionality.
Those who adopt the stance that the majority is always wrong (ever a sound proposition) are frequently thought to be radicals.
May 8, 2010 3:57 PM | Reply | Permalink
Dean,
What I would like to know is why the other 12 Trillion dollars is not audited.
On March 31, 2009, Bloomberg reported that the "U.S. government and the Federal Reserve have spent, lent, or guaranteed 12.8 trillion..." If you subtract the 700 billion for TARP, that leaves 12.1 trillion.
In January 2010, Mother Jones reported that in Nomi Prins' book, It Takes A Pillage, the cost of the bailout was "14.4 trillion and counting."
That seems to leave a lot of money unaudited. It seems the taxpayers need to know more than just what the Fed lent amounting 2 trillion dollars.
Hopefully, you will publish a comment or direct me to an answer.
May 9, 2010 9:52 AM | Reply | Permalink
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February 12, 2011 9:00 AM | Reply | Permalink
I'm not going to waste a lot of time responding to this nonsense. Auto insurance quotes online | Life insurance ratings
February 18, 2011 11:15 AM | Reply | Permalink
Well, I don't think it's nonsense. Anyway, politics and economy are always a hot topic nowadays, aren't they? ;-) Although I'm not a fan of senator Sanders, nice share! PS: since it's already older, any updated information on that issue? I just found two related German multiblogs: bohrhammer and wanduhren (for the german speaking tpms) :-)
February 27, 2011 6:39 AM | Reply | Permalink
I would vote for a more limited audit role than a general one. Los Angeles Self Storage The Fed should not be politicized.
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You wrote, "the Fed is a creation of Congress and for that reason it should be subject to the same investigative procedures as any other federal agency"
Ron Paul has been talking about this for years now and how illustrate how the Fed operates by it's own laws and gets influenced by other nations bankers.
Does no one see a problem with this?
Send Flowers to your local congressman with your complaints and ideas. it has more of an impact than even petitions full of hundreds of names.
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Hey, great contribution about the Sanders case here.
I live in Italy and I was searching about this because in my country it's happening something similar in these moments (and Berlusconi isn't involved in this scandal for once, lol...)
What can I say, unfortunately for us citizens, the politicians seems to be the usual charlatans in all countries... :(
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I'm the same way, I do my best to remain neutral. It's hard, if you communicate with the person the other person dislikes, then you fall out of favor with them! I simple can't dislike a person, just because someone else does, I just can't.
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I'd tend to agree - this is getting a bit old. But the fed needs to take an audit! So much tax payer money is being used and things need to change!
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Good to note such a healthy and heated discussion on the auditing of the fed.
Whether this is a witch hunt before jobs start getting axed in the name of cutting spending, is something to be seen.
Don't recall the last time the feds were audited, but I'm sure such info is readily available on the net.
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I wish I could say about time the fed tasted their own med, but this would sound so snide, so I hope this exercise, as dated as it is, was fruitful, and that we can begin to see a leaner, more streamlined fed dept doing what they're assigned to do.
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I believe it is a great argument. And that's why I'm arguing a narrower role in the inspection could not be better than a general. tendency to continue politicization of the Fed would ultimately be good land.
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I like the power, that to control the power to issue a report and instead of directly. It is up to the Fed to defend its own independence at this point.
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