Sen. Rand Paul’s effort to carry his father’s torch in calling for an audit of the Federal Reserve has a better chance of success in Congress this year than ever before. And, predictably, critics of the plan are beginning to shriek wildly about how Paul’s version of monetary transparency could drive the nation to economic ruin.
Paul reintroduced his “Audit the Fed” last week in the House with the help of 30 co-sponsors, including Sens. Ted Cruz (R-Texas), Marco Rubio (R-Fla.) and a lone Democrat, Sen. Mazie Hirono of Hawaii.
The legislation’s supporters say it would grant the Government Accountability Office the authority to audit the Federal Reserve and provide congressional oversight for the central bank’s credit facilities, securities purchases and quantitative easing activities.
“A complete and thorough audit of the Fed will finally allow the American people to know exactly how their money is being spent by Washington. The Fed’s currently operates under a cloak of secrecy and it has gone on for too long. The American people have a right to know what the Federal Reserve is doing with our nation’s money supply. The time to act is now,” Paul said in a statement regarding the bill.
Similar incarnations of Paul’s legislation have passed in the House in previous years but always stalled in the Senate, where Majority Leader Harry Reid (D-Nev.) — despite thinking “we should audit the Federal Reserve” — simply never allowed the legislation to be brought up under his rule. With the Republican takeover in Congress, Paul’s legislation has a real chance of growing legs in 2015 — that, at least, appears to be the case, based on the number of critics shrieking about the dangers of auditing the central bank.
The Hill newspaper reported that a number of regional Fed officials have spoken out, claiming that Paul’s bill has the potential to do irreparable damage to the nation’s economy.
“Who in their right mind would ask the Congress of the United States — who can’t cobble together a fiscal policy — to assume control of monetary policy?” Richard Fisher, president of the Federal Reserve Bank of Dallas, told the paper.
Fisher added that Paul was only trying to create a boogeyman with the help of economic outsiders who view the Fed as “some kind of combination of Hogwarts, the Death Star, and Ebenezer Scrooge.”
The central bank’s critics, Fisher also said, haven’t taken the time to examine “the copious amounts of reports and speeches and explanations we emit.”
Charles Plosser, who heads up the Philadelphia Fed, said that it was a bad idea to give Congress the power “to audit and question monetary policy decisions in real time.”
“This runs the risk of monetary policy decisions being based on short-term political considerations instead of the longer-term health of the economy,” Plosser told The Hill.
Federal Reserve Chairwoman Janet Yellen has vowed to fight Paul’s legislation and is scheduled to testify before Congress later this month.
Fed officials aren’t the only group challenging the audit legislation. But, as The Hill points out, they could be one of the most dangerous enemies to a potential 2016 presidential contender: “The twelve presidents of the Fed’s regional banks are well connected, their boards of directors stacked with influential business leaders.”
Anti-audit rhetoric has also begun cropping up outside the halls of central bank buildings, primarily on the opinion pages out national media outlets.
“Not this again,” Washington Post opinion writer Catherine Rampell recently wrote of Paul’s bill before warning that the senator’s plan is “extraordinarily dangerous to the health of the U.S. economy.”
The problem is, despite the name, this bill is not really about transparency. It’s about subjecting more of the Fed’s day-to-day operations — including policy deliberations in which Fed officials, for now, feel free to speak candidly — to the scrutiny of politicians who can pick discussions apart to score political points as policy is being set in real time. The likely result is a chilling effect on open dialogue, as Fed officials try to avoid making any comments in meetings that might lead to harassment from Congress, and more sensitivity to short-term political pressures.
And in USA Today, Business columnist Darrell Delamaide described “Audit the Fed” as “a Trojan horse designed to impose political control over monetary policy” and the result of personal philosophical beliefs in the Paul family “that some have characterized as paleo-conservative.”
[I] it’s not an economist seeking to breach the sacrosanct concept of central bank independence.
Instead, an ophthalmologist-turned-senator is carrying on the crusade begun by his father, an obstetrician-turned-congressman, to hobble and eventually eliminate what they see as a pernicious modernity — an issuer of a currency not tied to gold.
It isn’t true that Paul’s current legislation has anything to do with gold. The only conceivable reality in which it would lead to a gold standard is a pretty bad one — one that involves economic collapse due to total loss of American faith in the Fed.