By Bob Barr
as published on The Conservatives.com
via BobBarr.org
Last week’s approval by the House Financial Services Committee of the Ron Paul-drafted legislation, the “Federal Reserve Transparency Act” (HR 1207) as part of Chairman Barney Frank’s financial services “reform” bill, has caused much consternation on the part of the Federal Reserve. Fed Chairman Ben Bernanke reportedly has been plying the Halls of Congress in an effort to convince lawmakers that opening the Fed to even the limited scrutiny HR 1207 mandates would cause the sky to fall. The reality is that bringing meaningful accountability to this powerful, 96-year old private bank than manages our public money supply, will require much heavier lifting by the Congress than a single piece of legislation opening the Fed’s actions to limited audit by the Government Accountability Office (GAO).
Since its creation in 1913, the Federal Reserve Bank and its seven Board members have enjoyed a degree of power and autonomy not shared by even the most secret of our foreign intelligence agencies. The president appoints all members of the Fed board, who are then subject to confirmation by the Senate. The chairman and vice-chairman are selected by the president from among the seven board members, and then subject to separate Senate confirmation. While not appointed to life tenure as are federal judges, the Fed board members serve lengthy, 14-year terms.
Although the chairman of the Fed testifies publicly before both House and Senate committees each year, Rep. Ron Paul is correct in noting that such hearings do not in any meaningful way constitute real oversight of the central bank. The “normal” manner in which such hearings are conducted by the huge, 70-member House Financial Services Committee, does not and cannot be structured to provide in-depth, long-term guidance or accountability.
While Ron Paul’s proposal would make a dent in the secrecy shield clothing the Federal Reserve Bank, even if it were eventually to pass both houses of Congress, there is no guarantee at this point that President Barack Obama would sign it into law. And even if the president was to do so, the limited degree of public transparency such a law would bring to the venerable Fed, would amount to far less scrutiny and accountability than is required of every other agency, office and department of the federal government.
A far better approach would be to tackle the problem of Fed accountability by forcing the Congress (not the GAO) to do what it should have been doing all along but has declined to do – actually fulfill its job under the Constitution and conduct real oversight. In the case of the Federal Reserve, because of the complexity and importance of the issues that would necessarily be involved in such oversight, the regular, standing committee system of the House and Senate would be ill-equipped to manage such endeavors except in a cursory fashion. Instead, both houses should consider legislation establishing permanent select committees to deal with the Fed.
In this way, a limited number of members of each house could be chosen based on expertise and interest. Partisan politics could be minimized by mandating equal representation by both major parties, with the chairs chosen by the majority party. The last time Congress addressed a serious oversight problem in this manner was in the late 1970s, when lack of accountability and transparency of the CIA and other foreign intelligence agencies led to serious civil liberties abuses by those agencies. In an effort to bring long-term, institutional accountability to this mess (which reached its peak during the administration of President Richard M. Nixon), the Democratic-controlled Congress established the House Permanent Select Committee on Intelligence (HPSCI) and the Senate Select Committee on Intelligence (SSCI).
While the three-decade history of oversight by the two intelligence oversight committees has not been uniformly positive, and partisan politics continues to plague the work of both the oversight committees and the executive branch agencies they oversee, the unique structure created more than three decades ago has worked much better than the previous, “good ole boy” system; and arguably on balance, overall quite well.
To me, and to many in the Congress and certainly among the public at large, the need for a much greater degree of transparency and oversight of the Federal Reserve Bank than we have witnessed to this point, is absolutely essential. Entrusting to a closed fraternity of seven men and women, shielded from any meaningful mechanism to ensure their accountability, has – at a minimum – magnified the mistakes the Fed has made over the years of its existence. The various efforts to make the bank even less accountable than initially designed, such as the 1978 law limiting further even the limited audits of its monetary and foreign currency decisions, have failed to insulate the Fed from “political pressures.”
Structuring a serious, long-term oversight mechanism that provides flexibility even as it mandates certainty of accountability, would serve all parties – the Congress, the Fed, the administration, the taxpayers, and foreign and domestic financial institutions – far better than the current system cloaked in unnecessary secrecy.
23 responses so far ↓
1 Keith // Nov 28, 2009 at 3:35 pm
Bernanke and his Federal Reserve work for Goldman Sachs. Together they have damaged the world economy to enrich themselves. Yes, they must be held accountable, and punished.
2 Independent Green Party // Nov 28, 2009 at 4:15 pm
One way to make the Fed more accountable is to elect the Green Party’s Ralph Nader to U.S.Senate from Conn in 2010.
The incumbent has already spent, according to Open Secrets.org over $8 million.
With $2 million on hand…
Send Ralph and the Green Party money today!
3 Andy // Nov 28, 2009 at 4:16 pm
Oh, you mean Gold Mansacks!
4 relativemoney // Nov 28, 2009 at 4:20 pm
well, The FED screams for freedom and secrecy but… they knew the economy was getting over leveraged but… did not care. If i go the bank for a loan… I have a limit but… the sum of all economic agents in a country, including government have no limit…
Common sense do not prevails, why that?
5 mike // Nov 28, 2009 at 4:22 pm
Holding Madoff, Banks, Lehman Brothers, Meryll Lynch, etc. responsible for their crooked ways, I understand. Then why haven’t anyone held Feds responsible for all the wallstreet mess, they are equally responsible. Why is government never held in contempt in people’s court? Govt. was supposed to oversee the operations, not interfere, but oversee. SEC and other govt. agencies failed to catch them all red-handed, now govt. wants bigger govt. to prevent such mishaps in future. yeah right! we should believe that when govt. agencies are sleeping with all these top white collar crooks. America is a land of opportunity only if you are in Govt., white collar top executive or media-tied.
6 Danny S // Nov 28, 2009 at 5:11 pm
Barr should know that the intelligence agencies are less accountable than the the Federal Reserve by a longshot, committees or not. All it starts is a dance of testimony where nobody actually gets answers.
7 Mik Robertson // Nov 28, 2009 at 6:44 pm
@3 That’s funny! Dumb, but funny.
8 Tom Blanton // Nov 28, 2009 at 7:18 pm
The way to end abuses by the Fed and by the CIA is to simply shut them down.
9 Ben // Nov 28, 2009 at 10:57 pm
Independent Green Party – I really like Ralph Nader. Unfortunately another guy that I really like Peter Schiff is already running. Wish they could be the two from CT.
10 Trent Hill // Nov 28, 2009 at 11:15 pm
Ben,
Schiff is polling 1-2%, so he isnt a threat. If he magically won the primary, Nader being in the general would help him by drawing votes from voters who would probably otherwise vote for Dodd or not vote.
11 Andy // Nov 29, 2009 at 12:11 am
“Andy // Nov 28, 2009 at 4:16 pm
Oh, you mean Gold Mansacks!”
Don’t know who posted this as it wasn’t by the Andy (me) who usually posts here.
12 paulie // Nov 29, 2009 at 10:18 am
Andy is a fairly common name. This post was getting a lot of traffic for a while yesterday, although most of them did not leave comments, so it’s not surprising to see a few comments from non-regulars.
13 paulie // Nov 29, 2009 at 10:22 am
It was on the Daily Show the other day.
14 Scotty Boman // Nov 29, 2009 at 10:31 am
“Partisan politics could be minimized by mandating equal representation by both major parties…” Doesn’t sound very Libertarian.
15 padinsky // Nov 29, 2009 at 11:05 am
I’m in favor of greater oversight of the Fed by Congress. In our so-called democracy, the Fed Chairman [and his cronies at the Fed] has way too much power (viewed by many to be 2nd in Power only to the U.S. President…?) …for un-elected official [s]???.
The trouble is, who’s going to guard the guards? With the current system of campaign finance, our illected officials (Congress, et al.) are enthralled by those that pay them the largest campaign bribes contributions [Ex:“Do as we (your large 'contributors') say, or our bribes contributions go to your opposition in the next election.”] .
If they [our congress-persons] were subjected to the same standards as officials in our court systems (ex.: Judges,…or even just Lawyers), or even lowly, bean-counting, CPAs [who are asked to audit the financials of an entity in which they (those CPAs) have a financial interest] they (our congress-persons) would be required to recuse themselves from sitting on (oversight) committees [or even voting on the floor of the House or Senate] when it concerns entities who contribute more than X amount (according to some simple formula) to their campaigns.
Instead hard and fast ethical rules [...as in Rule of Law?] that mandate impartiality on the part of our elected officials, we’re asked to buy the ‘quick Persian rug’ that they [alone] are somehow able to withstand temptation, coercion, co-option, or corruption, and will faithfully execute the requirements of their office to promote the common good.
Until the time when we can truly rely on a higher power to imbue [zap?] our elected officials with super-natural powers of probity, incorruptibility, and infallibility, the moment they take the oath of office, we have to assume they can be ‘bought’ in some way-shape-or-form. We have to assume that they, being [mostly] human, really do have ‘feet of clay’. That they can be co-oped out of their regulatory duties. That they will be immersed in, and compromised by, an atmosphere of ‘going along to get along’ once they get into congress.
But, it at least behooves us to attempt to ensure that they haven’t been bought-and-paid-for even before they take office. That’s why we need to insist on 1) Stronger [and continuing] Campaign Finance Reform, and, once they (the officials) get into office, that they’re subjected to 2)The Same Professional Ethical Standards for Elected Officials that are applied to Lawyers and Accountants.
But these ethical standards need to be applied with the Force of Law rather than just being mere ’suggestions’. Otherwise there will be those who think [that since they are Makers of Laws] they are somehow above a code of ethics, that those who insist on ethical standards and moral probity in office are quibblers and pettifoggers who don’t know how ‘things really get done’ in the ‘Sausage Factory’. That their constituents aren’t paying attention anyway.
16 Stephen Verchinski // Nov 29, 2009 at 2:25 pm
Connecticut needs Nader as Senator if only to break the stranglehold that the unaccountable insurance and defense industries have on that state. We might ask ourselves also why is GE represented on the board? Why is the money supply not reported? Why do we continue to depreciate our currency? Why do we gin the figures for unemployment vs. that of the europeans? Why don’t we have state banks like N. Dakota?
17 Darcy G Richardson // Nov 29, 2009 at 4:42 pm
“Why don’t we have state banks like N. Dakota?”
Good question. As far as I know, the only candidate in the country advocating the establishment of a state-owned bank — an idea first proposed and implemented by North Dakota’s powerful Non-Partisan League — is Farid A. Khavari, an Iranian-born and University of Bremen-educated economist from Miami who’s seeking the Democratic gubernatorial nomination against the party’s annointed candidate, Alex Sink, Florida’s Chief Financial Officer.
Sink, who often comes across more as a Republican than a Democrat, is a former president of Bank of America of Florida and ex-colleague of disgraced Bank of America CEO Ken Lewis.
18 Danny S // Nov 29, 2009 at 7:12 pm
Trent, Schiff pulled 5% in the last poll and only just now started to actually campaign. And looking at other libertarian Republicans in this cycle, particularly Rand Paul, good funding + active campaigning has yielded results.
Now I don’t know if Peter Schiff will win the primary, but I would expect him to hit at least 15% in the primary. I think those trying to go the outsider approach in the primaries really have to start early to get poll results and to get grassroots activism- more like Rand Paul and Adam Kokesh. But its an unpredictable race.
I’m with Ben- I’ll root for Peter Schiff (whose father was an LP presidential candidate for the nomination at one point) and Ralph Nader.
19 Trent Hill // Nov 30, 2009 at 12:29 am
Danny,
I hope you are right. But I’m not convinced at all. Schiff has a very negative message (even if he is right, and he is) that is not going to resonate with voters. He will need to present himself in a much more positive light in ads–while incorporating his correct economic predictions into ads too. It will be tough, but he has the money, the activist base, and the credentials to hit 20%, I think.
Kokesh is in a hopeless district, but he might hit 40%.
20 MN Indy // Nov 30, 2009 at 6:25 pm
Forget making it accountable. Just abolish it already!
21 Zeleni // Nov 30, 2009 at 7:49 pm
Darcy,
Rich Whitney, the Green Party’s candidate for Governor in Illinois, is also advocating a state bank.
It’s mentioned on the front page of his website:
http://www.whitneyforgov.org
“I have a few other ideas, such as establishing a state bank, like North Dakota has. (See:
http://www.yesmagazine.org/issues/path-to-a-new-economy/bank-on-it-how-cash-starved-states-can-create-their-own-credit )
This is an old Progressive idea that needs to be revived. North Dakota is the only state that has its own bank and, as a result it is just about the only State that is not struggling with a deficit problem. In fact, with a population of just 600,000 people, it is now enjoying a surplus of $1.2 billion. All tax revenues go into the State bank, which then has the power to loan money and reap the benefits of interest income, utilizing a fractional reserve system like any commercial bank, while financing services and projects that support the public policy of the State. Instead of borrowing money from private banks, and paying it back to them, with interest, the State can be making money that can eventually lower the tax burden on the people.”
22 Darcy G Richardson // Dec 1, 2009 at 8:56 am
Thanks for the info, Zeleni. I wasn’t aware that Rich Whitney was also championing the idea of a state-owned bank. Including Farid Khavari, that might make three of us. Though Minnesota’s Farmer-Labor Party failed to enact a state-owned bank during the twenties and thirties — and not for lack of trying — it’s an idea that just might resonate during the most severe banking crisis since the Great Depression.
When he’s not chewing on his cellophane-wrapped cigar, Arthur C. Townley, the crusty old Socialist and founder of the Non-Partisan League, must be smiling at these developments from beyond.
23 Laura Kim // Jan 28, 2010 at 6:52 pm
Make that four. Bill Bradbury is running for Governor of Oregon and advocating a state-owned bank. His version of a state-owned bank would partner with private banks instead of compete against them.
http://bradbury2010.com/
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