Let's Audit the Federal Reserve!
Congressman Ron Paul from Texas introduced H.R. 1207 recently, which is a bill that would force the Federal Reserve to open their books and allow the people of the United States to see what they have been up to. Let's take a look at the actual bill.
The Bill
111th Congress - 1st Session
H.R. 1207
A BILL
To amend title 31, United States Code, to reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported, and for other purposes.
1. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the “Federal Reserve Transparency Act of 2009″.SEC. 2. AUDIT REFORM AND TRANSPARENCY FOR THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.
(a) IN GENERAL. - Subsection (b) of section 714 of title 31, United States Code, is amended by striking all after “shall audit an agency” and inserting a period.
(b) AUDIT. - Section 714 of title 31, United States Code, is amended by adding at the end the following new subsection:
“(e) AUDIT AND REPORT OF THE FEDERAL RESERVE SYSTEM. -
“(1) IN GENERAL. - The audit of the Board of Governors of the Federal Reserve System and the Federal reserve banks under subsection (b) shall be completed before the end of 2010.
“(2) REPORT -
“(A) REQUIRED. - A report on the audit referred to in paragraph (1) shall be submitted by the Comptroller General to the Congress before the end of the 90-day period beginning on the date on which such audit is completed and made available to the Speaker of the House, the majority and minority leaders of the House of Representatives, the majority and minority leaders of the Senate, the Chairman and Ranking Member of the committee and each sub-committee of jurisdiction in the House of Representatives and the Senate, and any other Member of Congress who requests it.
“(B) CONTENTS. - The report under subparagraph (A) shall include a detailed description of the findings and conclusion of the Comptroller General with respect to the audit that is the subject of the report, together with such recommendations for legislative or administrative action as the Comptroller General may determine to be appropriate.”.
This bill simply requires an audit of the Federal Reserve, and a report that discusses what was found during the audit. Many people may think this sounds pretty elementary and basic, but the fact is, there has never been an audit of the Federal Reserve system since it was founded in 1913. This may seem crazy, and that's because it is! Why would a body that governs and essentially determines our monetary policy and even prints all of our money, be allowed to keep all of their inner workings secret? Obviously this should not be the case.
The intent of this bill does not seem to be to change anything about what the Federal Reserve does, or how they act; it simply aims to add transparency to the Federal Reserve so that taxpayers can see where their tax dollars are going. The Federal Reserve has introduced so many lending facilities in the past 12-18 months, putting trillions and trillions of taxpayers dollars on the line, how could anyone be against some transparency for this Institution?
As of today, congressman Paul's bill has 44 co-sponsors. This is good news, and lets hope that the support continues to grow. This bill should be a no-brainer for anyone in congress that actually cares about the Ameican People.
Any representative in the House or the Senate that would be opposed to a bill like this should never be re-elected in my opinion. There is no logical reason that I can think of as to why the details of these Federal Reserve programs should be closed from taxpayer view when taxpayers are ultimately the ones footing the bill.
This page has information about how you can contact your representative and urge them to vote for this bill!
Who Thinks Theres More In Store for Citigroup?
It looks like Citi is finally losing one of its Chief Economists. This would normally be great news for a company that has been run very poorly, has been consistently incorrect about its capitalization (or lack thereof) and well-being. The Economists at Citi obviously did not see this coming, and did not do much of anything to help the company avoid immanent economic problems.
What is startling about this bit of news, is that the economist in question is actually leaving Citi for another job. Now, who might be silly enough to want to hire such a person who failed to predict, act, understand, or prepare for this deteriorating economy? You guessed it! Uncle Sam!
Citi's Chief Economist Leaves for Treasury Post
Citigroup Inc.'s chief economist is leaving the New York company for a job at the U.S. Treasury Department, according to an internal Citigroup memo.Lewis Alexander, who has been at Citigroup since 1999 and before that worked at the Federal Reserve, will head to Treasury "to work on domestic financial issues," said the Citigroup memo, which was sent Tuesday.
Great! He obviously did such a great job working on "financial issues" with his previous employer, let's all welcome him onto the public payroll!
According to a government official, Mr. Alexander will be a counselor to Treasury Secretary Timothy Geithner. Mr. Alexander and a Treasury spokesman weren't immediately available to comment Tuesday. A Citigroup spokesman declined to elaborate on the company's memo.
Geithner is already so far off course, I can't imagine what this new addition will bring.
Mr. Alexander, who was the Commerce Department's chief economist from 1993 through 1996, is joining Treasury at a time when the department is scrambling to beef up its ranks of senior officials. The current staff shortage has fostered doubts on Wall Street and in Washington about the Obama administration's ability to get its arms around the financial crisis.
"Scrambling to beef up its ranks of senior officials." Sounds like they are being very, very selective. Why do they need to be beefing up their ranks right now, anyway? I think we might all be better off if the treasury sent everyone on a 2 year vacation instead (and this might be cheaper, too!).
Mr. Alexander's role as Citigroup's chief economist didn't entail significant management responsibilities. But his optimistic economic forecasts colored executives' views that the U.S. was unlikely to face a prolonged slump.
No significant managemente responsibilities, an optimistic economic forecast, sounds perfect for a government position! And think about it, how coul there possibly be a prolonged economic slump with all the optimism this guy has!
Mr. Alexander's Track Record
Let's take a look at his track record to see how well-suited he is for this new government position.
"I think that's not going to spill over more broadly into the economy, and so I think we're going to have a normal kind of housing cycle that's going to last through the middle of this year," Mr. Alexander said in a Feb. 28, 2007, interview on PBS.
In the past five quarters, Citigroup has booked a total of more than $37 billion in net losses, largely stemming from the company's overexposure to the U.S. real-estate sector. In a memo last week, Citigroup Chief Executive Vikram Pandit said the company was profitable in the first two months of 2009.
Let's note some key points:
- Didn't think subprime would "spill over more broadly into the economy"
- Thought we would have a "normal kind of housing cycle"
- Led his company to over-expose itself in incredibly risky assets
All in all, what more could you expect of a soon-to-be government employee?
Maybe We Could Do Better
I could imagine that maybe Peter Schiff, Lew Rockwell, Michael Shedlock, or any of the other austrian economists that saw this coming as early as 2003 and maybe before. Maybe any of these people would qualify a little bit more than Mr. Alexander, but maybe I'm wrong.
Citigroup's Christmas Comes Early
I think one thing is clear from this action. Citi is not done receiving gifts from Uncle Sam. You think Mr. Alexander is going to let his old buddies at Citi just go under? Now its a nice, close-knit family, and there's nothing to worry about because the taxpayers can foot the bill. Looks like its Christmas again for Citigroup.
Bernanke May Need More of Our Money to Counter Contraction
Ben Bernanke has recently said that we may need 'massive' asset buying. Let's take a look.
Bernanke May Need ‘Massive’ Asset Buying to Counter Contraction
March 17 (Bloomberg) -- Chairman Ben S. Bernanke and Federal Reserve policy makers may have to ramp up their purchases of mortgage securities and other assets after the economy and job market deteriorated further since they last met.
Why would they possibly have to do this? They may have to print more money at our expense? I do not think that they will ever have to take this action, and I can only hope that they will not (but they will, of course).
Redouble Efforts, or Stop Trying?
The Federal Open Market Committee, gathering today and tomorrow in Washington, needs to redouble its efforts after the central bank’s balance sheet shrank 17 percent from a $2.3 trillion December peak, Fed watchers said. The retreat came even as Bernanke acknowledged the chance that the unemployment rate will exceed 10 percent for the first time in a quarter century.
I think rather than "redoubling" their efforts, the Federal Open Market Committee should take a 5 year vacation. Why is the balance sheet of the Fed shrinking anything bad? The balance sheet of the Fed needs to be shrinking, and I would love to see it go to 0.
Massive Balance-sheet expansion, or Common Sense?
“It takes massive balance-sheet expansion to generate significant easing in financial conditions,” said Andrew Tilton, an economist at Goldman Sachs Group Inc. in New York who used to work at the Treasury. “More needs to be done.”
I would say that massive balance-sheet expansion simply makes it much harder to eas financial conditions, and it forces the healing process to take much, much longer. I'm not sure why anyone is listening from Goldman Sachs economists anyway, they haven't done such a great job recently at understanding what was coming.
More does not need to be done except in the name of lower taxes and a less-invasive and smaller government. These things will surely help boost the economy, while the current actions and policies will only stifle any recovery.
Deflation is NOT Bad
This week’s FOMC meeting could mark a shift toward more aggressive monetary expansion to fight deflation after demand waned for many of the Fed’s existing programs. One top consideration is an increase in the pace and size of a $600 billion program to buy bonds issued and backed by U.S. housing agencies such as Fannie Mae, analysts said.Other measures could include everything from purchases of Treasuries to corporate bonds, Tilton said. The Fed has already agreed to work with the Treasury on implementing a program to revive consumer and business loans, which the Obama administration has said could reach $1 trillion.
Once again, the Fed is looking to fight deflation, when deflation is the best thing that could be happening to the poor and middle class right now. Goods and services are getting cheaper, and thus more affordable, and the Fed wants to "fight" this!
Fewer Loans, Not More!
We simply do not need more loans, we need more savings. People cannot spend money on more and more credit forever. It seems the Fed does not yet realize that this massive expansion of credit peaked, and we are not returning to that level of credit for quite some time. People do not want to take on the debt, and creditors are not willing to extend the debt.
Throwing more and more money at programs "to revive consumer and business loans" are simply futile right now -- and they make no sense. Loans are risky, and we have far too much credit in the system. Default rates are soaring, and the government wants to loan out money. This is a terrible idea, and it amounts to throwing money into a black hole. Unfortunately, this money will come from us, our children, their children, and probably even their children.
America not like Japan
One last bit of humor to note from the article:
Bernanke calls the Fed’s policies “credit easing” to contrast with the “quantitative easing” used by the Bank of Japan earlier this decade, which targeted reserves injected into the banking system.
Oh, great. Let's not get ourselves confused with Japan and their two decades and counting of poor economic policies with poor results. They were foolishly trying to inject money into the banking system. We don't want to get that confused with what we are now doing in America.