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Since the
announcement last week that I will chair the congressional subcommittee that
oversees the Federal Reserve, the media response has been overwhelming.
The groundswell of opposition to Fed actions among ordinary citizens is
reflected not only in the rhetoric coming out of Capitol Hill, but also in
the tremendous interest shown by the financial press. The demand for
transparency is growing, whether the political and financial establishment
likes it or not. The Fed is losing its vaunted status as an institution
that somehow is above politics and public scrutiny. Fed transparency
will be the cornerstone of my efforts as subcommittee chairman.
Thanks to
public pressure earlier this year, Congress did pass legislation that
requires the Fed to disclose some information about its bailout of select
industries and companies following the 2008 financial crisis. So two
weeks ago the Fed released data concerning more than $3 trillion of
assistance it offered to banks through its bailout facilities. After
reviewing this data, however, we are left with many more questions about the
Fed's “lending”.
In the “Term Securities Lending Facility”, the Fed was supposed
to have loaned against AAA-rated securities-- yet over half of the collateral
put up by banks to obtain loans had no listed credit rating. Should we assume
that the Fed accepted absolute junk rated securities as collateral for
loans? Presumably these securities were so bad that they wouldn’t
even publicize their credit rating. So why should our central bank,
backed up by your taxes, accept such collateral?
On another note, of the $1.25 trillion purchased under the Fed’s
“Mortgage-Backed Securities Purchase Program,” only $877 billion
in purchases have been publicized. What happened to the remaining $400
billion?
These kinds of limited disclosures by the Fed only underscore the need for a
full and complete audit of the Fed’s financial books. This audit
should be done by an independent third party, in the same manner that public
companies are audited. The Fed should make public its balance sheet,
income statement, and perhaps most importantly its cash flow statement.
It also should publicize the notes explaining those financial statements.
We seem to
forget sometimes that Congress created the Fed-- it is a government-created
banking monopoly, and its top decision-makers are appointed by the President
and confirmed by the Senate. If the Fed does not perform satisfactorily in
the eyes of these politicians and their constituents, the Chairman and
Governors may not be re-nominated.
In theory,
Congress could even repeal the Federal Reserve Act altogether since it has
the authority to do so. Obviously Congress is within its authority to
audit an organization it created by statute, and it is time to assume that
responsibility.
With 320 Members of Congress cosponsoring my legislation to fully audit the
Fed in the 111th Congress, my hope is that we can build on our broad
bipartisan coalition in 2011 and continue the push for greater Fed
transparency going forward.
Ron Paul
www.house.gov/paul
Visit Congressman Ron Paul's Web Site
Congressman Ron Paul of Texas enjoys a national reputation
as the premier advocate for liberty in politics today. Dr. Paul is the
leading spokesman in Washington for limited constitutional government, low
taxes, free markets, and a return to sound monetary policies based on
commodity-backed currency. For more information click on the Project Freedom website.
Published with the authorization of Dr. Paul.
Copyright Dr. Ron Paul
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