Ron Paul Legacy Lives on as House Passes Fed Audit Bill

The House has approved a bill that would open the Federal Reserves activities, including its deliberations on interest rate policy, to increased congressional scrutiny.

The legislation would direct the Government Accountability Office to conduct a full audit of the Feds operations and report back to Congress. Currently, the GAO reviews the central banks financial operations, but not its policy decisions or agreements with foreign governments and central banks. An outside firm audits the Feds financial operations and its findings are published in the central banks annual report.

Known to some on Capitol Hill as the Audit the Fed bill, it passed the Republican-controlled House Wednesday on a 333-92 vote, with support from 106 Democrats. However it would likely face more opposition in the Senate, which is controlled by Democrats.

[This] bill brings us one step closer towards bringing much-needed transparency to our nations monetary policy, Rep. Paul Broun (R., Ga.), a sponsor of the legislation, said in a statement.

Rep. Elijah Cummings (D., Md.) voiced his opposition to the measure as it was debated on the house floor Tuesday. If enacted, this bill would severely curtail the independence that has been a hallmark for the Federal Reserve and has been essential to its ability to strengthen our country, he said. It would permit GAO to audit the communications that members of the Federal Reserves Board of Governors have with each other and with staff regarding monetary policy.

Fed officials strongly oppose any legislation that might give lawmakers direct oversight over monetary policy, arguing this would compromise the principle of central bank independence. The fear is that lawmakers would put short-term political interests ahead of the broader economic well-being if their hands got too close to the central banks policy levers.

The bill was based on a previous effort by former Rep. Ron Paul (R., Texas), who ran for the GOP presidential nomination in 2012.

Mr. Pauls Audit-the-Fed push was part of a postcrisis backlash against the central bank, which was seen by critics as both too slow to foresee the oncoming disaster and too lenient with the banks that received taxpayer backing through a string of financial rescue packages and emergency credit facilities. Fed officials and their defenders said those responses helped prevent the 2008 crisis from escalating into a more catastrophic financial system meltdown.

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Ron Paul Legacy Lives on as House Passes Fed Audit Bill