Reply #18: Dean Baker believes the Fed audit compromise is a big step forward

[Better Believe It]

Unwashed Masses 1, Fed 0: Sanders Scores
by Dean Baker
May 7, 2010

Sanders did make some compromises. The audit has an arbitrary cutoff date of December 2007. The special facilities date from the summer of 2007. It also only has the audit as a one-off proposition, rather than establishing GAO audits of Fed operations as an ongoing principle. The compromise also explicitly exempts open market operations - the Fed's daily buying and selling of short-term assets to control interest rates - from GAO scrutiny.

These concessions are unfortunate, the Fed is a creation of Congress and for that reason it should be subject to the same investigative procedures as any other federal agency, but they certainly are secondary compared with getting a full accounting of the money lent out through the special facilities. It is also important to note that in one very important way the Sanders compromise goes beyond the original Paul-Grayson language. Under the compromise, the information about the lending facilities will be made fully public where everyone can scrutinize it. The original bill would just have this information made available to the relevant congressional committees. They would then have to make a further decision about what information, if any, would be made public.

There has been a long ongoing battle with the Fed over its policy of excessive secrecy. Over the years, Congress has pushed back at efforts to treat the Fed as a holy temple outside of democratic control. It has made progress at holding the Fed accountable through measures like requiring the semi-annual Humphrey-Hawkins testimony by the Fed chair before Congress, the release of full transcripts of Fed open market meetings (with a 5-year lag), and now this public audit of its special facilities. There will be further battles and we have a long way to go before the Fed is as democratically accountable as it should be, but the Sanders compromise is a big step forward.

Please read the full article at:

http://www.commondreams.org/view/2010/05/07-5