I am inclined to 100% agree with Dean Baker’s assessment of the audit the Fed compromise hammered out yesterday.

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.

Yes it is, and as I have come to understand, the entire point of conducting an audit of the Fed was to get at these special lending facilities. “What have you done with our money” was the key question, which will be answered under the terms of this deal (which still has to go through a conference committee and a final vote, mind you).

Now I know Ron Paul and some libertarians are angered by this deal. But understand that Ron Paul doesn’t want an audit of the Federal Reserve. He wants to end the Federal Reserve. The best-selling book “End the Fed” that he wrote tipped me off to this. He wants to go back to hard-money policies and a return to the gold standard. Now, you can argue that this would end the cartel of central bankers scheming with their monetary policy, or that it would turn US monetary policy into the inflation-uber-alles laissez-faire mess we’re seeing in Europe that is threatening a global depression. The consequences for Paul’s favored end-state would be catastrophic if implemented in real time. This Fed is failing in different ways – and their actions should draw more scrutiny – but eliminating it would return us to the Stone Age.

And so you should probably know who you’re dealing with. There’s no good reason for the restrictions on this particular audit, but in its streamlined form, it seeks to answer one question – what did the Fed do on an emergency basis with two trillion dollars in taxpayer money. Not only does the Sanders amendment force an answer to that question, it opens it up to public scrutiny in ways that Paul-Grayson didn’t. As Baker says, this is a beginning and not an ending for transparency and accountability.

David Vitter may offer the original proposal for a vote and more power to him. But an audit really is just an audit. Ron Paul wanted to use an audit as a tool to destroy the Fed.

Meanwhile I think there’s some needed perspective here. Fed transparency is important but it pales in comparison to the very real efforts to force fundamental changes to how Wall Street operates, changes that have thus far been batted down without people batting an eyelash. That has been the ongoing failure of this debate, sidetracked over an issue (however important) about opening up the books rather than ones that would actually legitimately constrain the runaway finance sector.

UPDATE: Let me close the book on this with Rep. Alan Grayson’s statement, with which I also agree (on the flip):

If Senator Sanders’ Federal Reserve Transparency Amendment passes in its current form, as we hope and expect, then America will finally find out about every secret bailout and ‘help for our friends’ slush fund established and perpetrated by the Federal Reserve in the past three years. This includes not only the so-called “Section 13(3) facilities,” but importantly, foreign currency swaps and mortgage-backed securities as well.

The Fed will be brought to account for its favoritism for the benefit of huge failed banks from 2007 through today. We expect that when we finally see what the Federal Reserve has been up to, the public will be outraged. Releasing this information will show that the Federal Reserve’s arguments for secrecy are — and have always been — a ruse, to cover up the handing out of hundreds of billions of dollars like party favors to the Wall Street institutions who brought the American economy to the brink of ruin.

The continued government lobbying against the Sanders Amendment should end now. Fed Chairman Ben Bernanke doesn’t want an audit because Ben Bernanke doesn’t want to be audited. Treasury Secretary Tim Geithner, the former head of the New York Fed, doesn’t want an audit because Tim Geithner doesn’t want to be audited. This is stating the obvious. But we cannot let legislation be determined by the personal vested interest of high government officials. What matters is not what’s good for them, but what’s good for America.

Yet when it does pass, the Sanders Amendment is only a partial victory. The most important improvement over what the Sanders Amendment offers would be to subject the Fed to audit for what it does going forward. To say that America can learn about only what the Fed has done already is like trying to drive a car by looking only in the rearview mirror.

The Fed is an institution that has the power to hand out hundreds of billions of dollars on a whim. Because of that power, the Fed must always be subject to independent audit — completely, and without reservation.

AUDIT THE FED.