Fed Documents Reveal Secret Lobbying Effort Against Audit Provisions

White House, Big Banks and Fed are desperately trying to kill off moves for transparency

Steve Watson
Prisonplanet.comTuesday, May 4th, 2010

The Federal Reserve is secretly engaged in an intense lobbying effort in an attempt to stave off moves to have the Government Accountability Office audit it, internal documents reveal.

The Huffington Post has obtained the documents, which were distributed to Senate offices by a Fed official, whose identity the online news site agreed not to reveal.

“The effort to beat back the audit relies on playing two members of the same caucus — Sens. Bernie Sanders (I-Vt.) and Jeff Merkley (D-Ore.) — off each other.” writes Ryan Grim.

Today will see a possible first round of votes on on amendments to Senator Christopher Dodd’s financial-overhaul bill. One such amendment is S 604 The Federal Reserve Sunshine act, the Senate version of Congressman Ron Paul’s Federal Transparency Act, sponsored by Sen. Sanders. The amendmentcalls for a full audit of the Fed.

The unnamed Fed official in the documents essentially acknowledges support of a much more restrictive audit proposal by Sen. Merkley.

“I am sending some information on the effects of audits of the Federal Reserve System as well as two additional documents – one summarizes the GAO and related provisions in the Dodd Bill as passed by the committee (Title XI, Sections 1151-1153) and the other is a summary of the Sanders and Paul/Grayson amendments,” the Fed official wrote in an e-mail accompanying the documents.

“As I mentioned, we believe that the bipartisan Corker-Merkley provision in the Dodd Bill is quite strong and addresses issues of transparency and disclosure without impinging on the independence of monetary policy,” the Fed official writes.

Ron Paul’s Campaign For Liberty website has consistently addressed the problem with this watering down provision, noting that it guarantees continued secrecy for the Fed.

Paul and Sanders have persistently disproved the Fed’s claim that their provisions for an audit would interfere with monetary policy deliberations and the Fed’s overall independence.

Merkley’s provision is essentially a Senate version of Congressman Mel Watt’s (D-NC) amendment to the House financial reform bill, which would have severely limited the audit, and gutted Ron Paul’s H.R. 1207 bill.

The Watt amendment was also supported by the Fed before it was rejected in favour of Ron Paul’s amendment by the House Financial Services Committee last November.

Even Merkley himself notes that the provision weakens the prospect of an audit of the Fed:

“I appreciate Representative [Alan] Grayson’s concerns over accountability at the Federal Reserve. I have been a strong proponent of Fed reform and voted against the re-confirmation of Ben Bernanke because the Fed has been so lax in using its regulatory powers,” Merkley said in a statement to HuffPost, responding to an analysis from Rep. Alan Grayson (D-Fla.) showing that the Senate bill did not meaningfully expand transparency.

“Moreover, I felt strongly that we need to act now to empower the GAO to audit the extraordinary emergency programs created by the Fed and I succeeded in getting that power into the Senate bill. Rep. Grayson points out, fairly in my mind, that we need to go even further to audit the Fed’s standing programs. I agree. While we need to protect the Fed’s independence to implement monetary policy, I think the structure and use of their standard programs should be transparent.” Merkley added.

A full audit of the Fed under the Sanders and Paul/Grayson amendments would pave the way for disclosure of which financial institutions received $2 trillion in public bailout funds, information that the Fed refuses to make public and, along with the largest commercial banks in the U.S.,has fought tooth and nail to keep secret.

The Sanders and Paul/Grayson amendments would ensure that such lending could never again be done in secret.

Their efforts were boosted yesterday by the damning revelations that former Fed chairman Alan Greenspan wanted internal warnings over the housing bubble kept secret in 2004, so that outsiders, whom he said did not fully understand the situation, would not be able to interject in the debate.

In addition to the backlash from the Fed and the banks, the audit provisions face opposition from the White House, with the administration trotting out the same argument that an audit would threaten the independence of the Fed.

“It’s likely, in fact, that the Obama administration will be under intense pressure to veto the entire financial reform bill if ‘audit the fed’ survives.”, notes Brian Beutler.

White House chief of staff Rahm Emanuel is reportedly working closely with the Fed to kill off the audit provisions at all costs to protect the power structure dominated by the international banking elite.

Yesterday Congressmen Grayson and Paul appeared on Dylan Ratigan to discuss the progress of their efforts to audit the Fed.