In addition to the strangely filibuster-free passage of the Democratic tax cut plan in the Senate, the House did some legislating yesterday as well, which reminded us just how far we’ve come in a few short years. Before the bailouts, Ron Paul put up his bill to audit the Federal Reserve almost every year. And every year, it was routinely ignored. Paul ran for President in 2008 and created the conditions for the rise of the Tea Party, or at least solidified their take on a particular set of issues. By 2010, he was, with the help of Alan Grayson, getting a massive amount of lawmakers to join him on his Fed audit bill, as an amendment to the Dodd-Frank law. That ultimately passed, albeit in watered-down form. The information gained from the audits added greatly to our understanding of how the Fed used massive amounts of funds in an extraordinary way during the financial crisis. It opened the door just a crack on Fed policymaking.
This week, Paul came back with his Fed audit bill, the original bill that passed the House. It wasn’t attached to anything, it wasn’t part of a Christmas tree where people could vote for or against the bill for other reasons. It got a vote in the House on the suspension calendar, which needed a 2/3 vote. The Democratic leadership, taking their cues from the Fed and in all likelihood the White House, whipped against the bill. And it still passed by a wide margin.
The House of Representatives on Wednesday overwhelmingly approved the Texas Republican’s bill to increase the transparency of the Federal Reserve. With bipartisan support, the measure passed 327-98. One Republican, Rep. Bob Turner of New York, joined 97 Democrats in voting against it.
For Paul, the journey to getting his bill approved in the House has been a long, and often lonely one. He first introduced the bill to a skeptical House a decade ago. While his efforts were ignored at the time, the call to “audit the Fed” has gained support from mainstream Republicans and Democrats.
Steny Hoyer, who led opposition to the bill, said it would “jeopardize the Fed’s independence.” Considering how much of a failure Fed policy has been since the financial crisis, I don’t think that’s something we need to cherish. Transparency on the actions from the people who create policy on the economy, which affects every one of us, is not too much to ask. In fact, we had it with the one-time GAO audit from Dodd-Frank, and nothing happened. Nobody died. Fed decisions were not compromised. These are the words of people who would rather conceal the enormous largesse bestowed upon the banks, rather than reveal it.
And by the way, 89 Democrats bucked the leadership and supported the bill. So the best efforts of Steny Hoyer and friends to enshrine secrecy at the Fed weren’t even all that successful.
Republicans may have their own reasons for wanting a Fed audit. They want to change the central bank’s mandate, dropping full employment. They may even want to hamstring decision-making on a political level. But they won’t run the audit, the GAO will. And GAO is pretty scrupulous on these kinds of things, giving the public the information they deserve to understand what our leaders are doing on policies that have monumental effects on our lives. Furthermore, there SHOULD be deliberation about matters of the Fed. I do it on this site virtually every day. Most of the end of the 19th century featured a political debate on “the money question,” between the gold standard and the coinage of silver. That was mostly healthy and gave rise to the Progressive movement. The Fed should not be a black hole where decisions are made in a hermetically sealed environment. Their job is too important, and the risk too great.
Harry Reid will not put the audit the Fed bill to a vote. I doubt President Obama would sign it (though Mitt Romney made some soothing words about it, I kind of doubt he would sign it, either). And Ron Paul is leaving at the end of the year, so I don’t know who ends up taking up this mantle. But the Fed is not a taboo subject on Capitol Hill anymore. That’s on balance a good thing.