Submitted by James Miller via FreedomWorks.org
,
A
whistleblower-hatingpresident, a bureaucrat who
illegally targeted conservatives, and the
former national intelligence director who
lied before Congresswalk into a bar.
The bartender says: what can I get “
the most transparent administration in
history”?
If Janet Yellen didn’t resemble a
bookwormish teetotaler, perhaps she’d join her
colleagues in a toast to suppressing democratic
accountability.For now, she’ll order a club soda while
working vigorously to keep Congress, and thus the people, out of
her business of running the country’s central bank.
Yellen has only been Chair of the Federal Reserve for one year,
but she’s
already facing pressure to open the books from the new
Congress. Leading the charge are two statesmen from
Kentucky: Representative Thomas Massie and Senator Rand Paul. Both
have introduced audit the Fed legislation in their respective
chambers.
Wall Street’s cadre of financial oligarchs are predictably
up in armsover an audit of their
free money machine.Think tankers are
antagonizing the campaign, with Jim Pethokoukis of the American
Enterprise Institute asserting that Sen. Paul has “a poor
understanding of what’s actually on the Fed balance sheet and how
the bank operates.” It’s expected President Obama would
vetoan audit the Fed bill. Even local bankers
are scaremongering over the prospect of the Fed losing
autonomy.
Yellen, for her part, isn’t about to let the nosy wolves in
her henhouse.In a
recent interview, she said she would stand
“forcefully” against any audit measures. She justified her
intransigence by citing the importance of “central bank
independence” and being able to act without interference.
Nothing says limited government and separation of powers
like a bureaucracy unaccountable to the voice of the people! Then
again, Yellen doesn’t care much for democratic oversight. She’s a
caricature of Randian libertarianism: someone who wants to do
whatever, whenever, without rulers. The problem is Yellen isn’t
operating a private railroad company. She’s the figurehead for a
government institution created by Congress. If democracy means
anything, it’s that voters have some measure of control over
political bureaucracies.
So apologies Janet, you don’t operate in a bubble (insert
Fed pun here).The people - those plain people who think
economics is about supply and demand rather than complicated math
formulas - deserve some level of sway over the Fed’s operations. So
why not an audit by the Government Accountability Office? Last I
heard, President Obama was
all about accountability.
Yellen and company aren’t buying it. They don’t want anyone
butting in on their micromanagement of the money supply. Outside
observers would interfere with the Fed’s independence, which is a
sacrament of the central bank.
In an illuminating
interviewwith the Wall Street Journal, David
Wessel does his best to explain the history of the Federal Reserve
and Congress’s long trek to make its internal deliberations more
public. For over four decades, the GAO (then called the General
Accountability Office) was barred from investigating the Fed. That
changed in 1978, when Congress passed a law allowing the GAO to
look at the central bank’s “regulatory duties.”
Then the financial crisis of 2008 hit, and the Fed
intervened in the financial markets at an unprecedented
scale.Banks and Wall Street firms were bailed out to the
tune of tens of trillions of dollars. Main Street was left high and
dry. Voters were livid and rightfully so.
Congress - after ignominiously bailing out the banks further -
expanded the GAO’s authority to examine Fed loans to private
companies. With the passage of the Dodd-Frank bill in 2010, the Fed
was further opened up, and had to disclose “internal controls,
policies on collateral, use of contractors and other activities.”
Currently, the GAO is not allowed to review the Fed’s
discussions on monetary-policy decisions.
Rand Paul’s audit the Federal Reserve bill eliminates that
barrier.And therein lies to the problem according to Fed
apologists. As Mr. Wessel tells us, the central bank should be
protected from the influence of short-sighted politicians.
“[G]iving politicians power over interest rates and the supply of
credit hurts an economy over time,” he explains. “Prohibiting the
GAO—an arm of Congress–from second-guessing the Fed’s monetary
policy decisions is part of that insulation.”
Now, it is indeed true that politicians tend to be myopic
in their actions.An $18 trillion debt created by the
refusal to don big boy pants and cut spending is indicative of
Congress’s systematic immaturity. Having the likes of Nancy Pelosi
and John Boehner in charge of the Fed’s printing presses is a
startling notion. But that’s not what auditing the Fed
accomplishes. There is no language in either the House bill or
Senate bill that puts Congress in charge of monetary operations.
Fed proponents like Pethokoukis are demagoguing when they say
otherwise.
It’s true the Fed’s financial statements are audited every year
by the firm Deloitte & Touche.
That perfunctory measure didn’t reveal
the factthat the Fed took advantage of the
financial crisis to bail out foreign companies and central
banks.Over $16 trillion was
doled outto foreign institutions like Barclays
and UBS. The American public only became aware of the monetary
shenanigans because Dodd-Frank contained a partial audit of the
Fed’s activities. Had that not happened, we would still be in the
dark.
Central bank defenders who scream “independence” over the
prospect of an audit are misguided.The idea that political
institutions operate in a vacuum and are isolated from outside
interests is college-level idealism. It doesn’t pass the smell
test. Government officials are primarily interested in perpetuating
their power - public good be damned.
Janet Yellen is just as beholden to everyday politics as
President Obama. She’s not independent; her job depends on the
president’s approval.In a
recent testimonybefore Congress, Yellen
wondered aloud, “I really wonder whether or not the Volcker-led Fed
would have had the courage to take the hard decisions necessary to
bring down inflation and get that finally under control.” What she
referred to was the economic calamity that preceded the
inauguration of President Ronald Reagan. When the Gipper took
office, inflation was raging. Volcker was appointed to the Fed to
clamp down on rising prices. This wasn’t popular at first; hiking
interest rates tanked the economy. But Reagan stood by Volker,
giving him the political cover to follow through. As Washington
Post columnist Robert Samuelson
writes,
“[D]uring Volcker’s monetary onslaught, there were many
congressional proposals, backed by members of both parties, to curb
the Fed’s power, lower interest rates or fire Volcker. If Reagan
had endorsed any of them, the Fed would have had to retreat.”
Volcker didn’t operate independently. He had the support of the
Reagan White House. Just the same, Yellen isn’t free from
democratic pressure. She has to obey political headwinds.
If the Fed is not immune from politics, then why keep up
the facade of independence?Let’s acknowledge the central
bank must answer to the political class. And then let’s look at the
past: the Fed’s history is full of backroom deals for elite special
interests. That’s not an accident. Darkness gives cover to all
sorts of sleazy deeds. An audit would begin the process of weeding
out this secrecy.
If the Federal Reserve has nothing to hide, it has nothing
to fear, right?
