The Federal Reserve Transparency Act of 2015 (S. 2232), which was also known as the “Audit the Fed” bill, was defeated in the Senate on Jan. 12 after failing to obtain the 60 votes needed to invoke cloture, the final vote had been 53-44.
Republican presidential candidate Sen. Rand Paul (R-Ky.) introduced the bill in January 2015 and in November 2015 invoked Rule XIV to allow it to be placed directly on the Senate Legislative Calendar so that it could be called up for immediate consideration.
The bill would have directed the Government Accountability Office (GAO) to audit the Federal Reserve Board (Fed) and the Reserve Banks and report its findings to Congress. The bill also would have repealed certain limitations on such an audit. Current law blocks the GAO from evaluating the Fed’s monetary policy decisions.
“The objective of the Federal Reserve Transparency Act is simple: to protect the interests of the average American by finding out where hundreds of billions worth of our dollars are going. The Federal Reserve has the ability to create new money and spend it on whatever financial assets it wants, whenever it wants, while giving the new money to whichever banks it wants,” Paul said in his remarks on the Senate floor.
Paul also took issue with the Fed’s “price control.”
“Creating new money naturally lowers interest rates, or the price of using money. Put another way, the Federal Reserve’s unchecked printing press creates a price control on the cost of using money,” Paul said. “Throughout our country’s history, price controls have never worked, and the Fed’s price control on interest rates has not worked.
Opponents of the bill, such as Sen. Sherrod Brown (D-Ohio), the ranking member of the Senate Banking Committee – argued that the bill would have politicized the Fed’s monetary policy deliberations while imposing duplicative auditing.
According to a news release from the Senate Banking Committee’s Minority Site: “Congress requires the Federal Reserve to have its financial statements audited every year by an independent, external auditor. The Fed also releases quarterly reports presenting detailed information on the Fed’s balance sheet and information on the combined financial position and results of operations of the Reserve Banks to Congress. … Since the 2008 financial crisis, the GAO has conducted over 100 audits of the Federal Reserve’s activities. Many of these audits relate to the financial crisis, including the Fed’s emergency lending and discount window activities.”
The Dodd-Frank Act requires the Fed to make its financial statement audit; the quarterly reports and other audits, studies and reviews publicly available on its website.
“This legislation does nothing to benefit working Americans or our recovery. It would introduce politics into the Federal Reserve’s monetary policy decisions, which could have dangerous implications for financial stability. ‘Audit the Fed’ isn’t about transparency; it’s about giving 535 individual members of Congress the ability to micromanage monetary policy,” Brown said.
Presidential candidate Sen. Bernie Sanders (I-Vt.) supported the bill.
“Too much of the Fed’s business is conducted in secret, known only to the bankers on its various boards and committees,” Sanders said in a statement. “In 2010, I inserted an amendment in Dodd-Frank to audit the emergency lending by the Federal Reserve during the financial crisis. As a result of this audit, we learned that an institution that was created to serve all Americans had been hijacked by the very bankers it regulates.
“We must expand on that first review of the Fed’s activities. Requiring the Government Accountability Office to conduct a full and independent audit of the Fed each and every year, would be an important step towards making the Federal Reserve a more democratic institution that is responsive to the needs of ordinary Americans rather than the billionaires on Wall Street,” he said.
Former Rep. Ron Paul (Rand’s father) stated that he didn’t think the leading Republican presidential candidate, Donald Trump, would support the bill’s measures if it is reintroduced in the future.
“He made his fortune over fiat money and big banking,” said Ron Paul, who made auditing the Fed one of his campaign issues when he was a presidential candidate for the 2008 Republican nomination. “He could not have thrived, he could not have made his money without the Federal Reserve creating a boom in real estate prices,” Paul said.