After a committee vote and hearings in the US Senate on the nomination of Janet Yellen to the chair of the Federal Reserve system, many in the United States wait to see if the institution she plans to lead will face any serious scrutiny.
Subject to secrecy and opaque practices, the Federal Reserve is officially charged with setting monetary policy for the United States, but much of its activity is shrouded in mystery. Yet, despite some bipartisan support, there has been little movement toward an audit from the halls of Congress.
Amid a haphazard health care reform roll out, there is public interest in an audit of the Federal Reserve system. A Rasmussen poll found that 74 percent of one thousand surveyed American adults support an audit and only 10 percent fully oppose one. So, a relevant question arises: Why won't our Senate audit the Federal Reserve?
Leading the charge for an audit in the Senate is Rand Paul, a Republican from Kentucky who already held up Senate business earlier this year with a 13-hour filibuster. In January, Paul introduced a bill to audit the Federal Reserve, but despite 27 co-sponsors, no floor vote has come. A threat to filibuster the Fed chair nomination in order to get a vote on his current bill was part of Paul's arsenal.
Cutting off that threat was one of the leaders in preventing a vote: Senate Majority Leader Harry Reid. This marked a change in Reid's position.
In a well-circulated speech from 1995, Reid announced that he had sought audits since he arrived in the U.S. Senate, but lamented that his efforts were unheeded. Reid said as recently as his 2010 re-election campaign that he still favored an audit. Yet, when Ron Paul's audit bill passed the House 327-98 in 2012, Reid "vowed not to put it to a vote" in the U.S. Senate.
Now, Reid's movement on the issue includes his November 21 maneuver to the so-called nuclear option and the disruption of the use of the filibuster. With exceptions for Supreme Court appointments, nominees only need 51 votes for confirmation. Any expectation of a Paul filibuster re-do was effectively ended.
Despite this, the Federal Reserve's financial statements are already subject to periodic audits by the Government Accounting Office (GAO). However, it is exempt from auditing transactions with foreign central banks as well as communications between members of the Federal Reserve Board.
In a press statement by independent U.S. Senator Bernie Sanders' office, a 2011 audit of the Federal Reserve, the most extensive to date, found that $16 trillion in loans were made to foreign institutions along with trillions to "foreign banks and corporations from South Korea to Scotland." Inquiries to Paul's office were unreturned, but his Senate website says he wants to take a "critical look at the Fed's monetary policy decisions, discount window operations, and a host of other things, with a real audit."
In November, Louisiana U.S. Senator David Vitter asked Yellen in Senate hearings if she supported an audit as the kind prescribed in S. 209 -- Paul's current bill. The nominee replied that she supports transparency, but:
"What I would not support is a requirement that would diminish the independence of the Federal Reserve in implementing and deciding . . . monetary policy. For 50 years Congress has recognized there has been an exception to GAO ability to audit the Fed to avoid any political interference in monetary policy."
Other opponents of an audit, such as Maryland US Rep. Steny Hoyer, say congressional review of the Federal Reserve would produce a "nightmare scenario." Others, like at the conservative National Review, have opposed audits because it would deprive the Federal Reserve of its independence and subject the institution to the vacillations of congressional majorities.
Paul's bill has 27 co-sponsors, but only one is a Democrat: Sen. Mark Begich of Alaska.
A moderate Democrat who faces re-election in 2014, Begich was also the only Democrat to co-sponsor Paul's 2011 bill. The House audit bill, introduced by Georgia U.S. Representative Paul Broun, has a little more bipartisan representation with 179 co-sponsors, 14 of which are Democrats.
With the chance of a filibuster all, but terminated, Yellen appears ready to sail through confirmation. Her nomination was approved by the Senate Banking Committee 14-8, including support from three Republicans. One of those Republicans, Tom Coburn of Oklahoma, is a co-sponsor of the Audit the Fed bill. It is perhaps a sign that any Republican opposition to her nomination has crumbled.
A confirmation before the US Senate is expected next week, but it difficult to tell when an actual vote will take place.
Photo Credit: Gage Skidmore