HR 1207 – Federal Reserve Transparency Act

Young Americans for Liberty profiles Congressman Ron Paul’s bill to audit the Federal Reserve, HR 1207. Campaign for Liberty’s Matt Hawes and Ron Paul’s Legislative Assistant, Paul-Martin Foss, offer their insight on this historically significant push for legislation.

Source: Young Americans for Liberty
Date: 5/9/2009


Kevin Brett:This spring, Washington DC is buzzing with news of a legislative effort that could potentially alter the landscape of the American economy. Congressman Ron Paul has introduced a new bill to the House of Representatives entitled HR 1207, also known as the Federal Reserve Transparency Act.

We sat down with Matthew Hawes, the vice-president of programs at Campaign for Liberty to discuss the purpose and implications of Dr. Paul’s bill.

Matthew Hawes: And this we believe is to restore a piece of legislation because what this bill will do is it will allow for a complete and thorough audit of the Federal Reserve system.

The Federal Reserve System was created in 1913. It’s got control over the nation’s flow of money and credit and it has never truly been accountable to Congress. So it releases details of its meetings on its own timetable, even then those details that it releases are edited.

When it comes before Congress, it doesn’t have to fully answer the questions that the congressman puts on. So Congressman Paul’s bill, this Transparency Act, would remove any current restrictions on audits of the Federal Reserve, of which there are quite a few current restrictions. Remove any of these restrictions and for the first time allow Congress to take a full and complete look at the Federal Reserve’s books.

Kevin Brett:Paul-Martin Foss who is Congressman Ron Paul’s legislative assistant for monetary policy and financial services gave a comprehensive briefing regarding the specifics of the bill.

Paul-Martin Foss: The crucial issue, the one which HR 1207 addresses with regard to Federal Reserve transparency requires us to take a look at 31 USC 714, which is the section of the US Code that establishes that the Federal Reserve may be audited by the General Accounting Office, but which establishes severe restrictions on just what GAO may in fact audit.

Those are transactions for or with a foreign central bank, government of a foreign country, or non-private international financing organization. Deliberations, decisions, or actions on monetary policy matters including discount window operations, reserves with member banks, securities, credit, interest on deposits, and open market operations, transactions made under the direction of the Federal Open Market Committee, or a part of the discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to clauses (1) – (3) of this subsection.

So those are the areas that GAO may not include by law in its audit. So what we see is the full clause that basically encompasses about everything the Fed does in the realm of monetary policy, open market operations, and quantitative easing. Essentially the only thing the GAO can audit are some of the check processing, currency stored, shipments, some of the regulatory bank examination functions. On the most important matters, which directly affect the strength of the dollar and the health of the financial system, are immune from oversight.

Matthew Hawes: At the end of the day, we don’t get any important details on exactly what they’re doing. Sure, we know how much money they may have on hand. We know how much they’ve spent, you know, in retirement funding this year for their employees, but we don’t know exactly what’s going on with their decisions on monetary policy.

And recently, Fed chairman, Ben Bernanke was pulled up in front of the Senate and Senator Bernie Sanders confronted him on the whole issue of which institutions have been getting taxpayers’ dollars; “You’ve doled out trillions in taxpayers’ money. Which institutions have been given this money?”

And Bernanke was able to say no to that question. He wasn’t going to specifically name these people and then he went on to give a reason that we’ve mentioned earlier. He went on to say that, “Well, if we say which groups are getting these money, a lot of them would be scared to come and get the money anymore and it will put this whole thing at risk.”

There are a couple of problems with that. For one thing, businesses should be cautious about coming to get taxpayer money, so they won’t be coming and saying, “Give us billions and billions and billions of dollars.” so readily. They’ll thing about it a little bit more.

And secondly, you know, Bernanke and Geithner, all these people are saying that we’re doing all these to bring stability to the economy. Meanwhile, we’re not going to fully tell the American people which groups are in trouble, and so you’ve got people continuing to invest their money, continuing to save with these groups that may be on the shakiest financial ground than any other company, but they don’t know about it because Bernanke won’t say anything.

So instead it would bring true stability to the system if he comes out right now and say well, these groups are the ones in trouble. These groups are the ones receiving loans. Leave it up to the American taxpayer; that should be their choice whether or not they’re going to continue to invest with these companies.

If they look at the books and they see which ones are truly in trouble, but, you know, there’s a chance that things could come up okay for them, then let them continue to invest if they choose.

If not, let them pull their money out and invest with the company that’s stronger and that will get us out of this crisis a whole lot sooner. But instead Bernanke is saying, “No, we’re not going to tell you”, and we’ll just going to wait until this gets bigger and bigger and bigger.

So if those loans that the Federal Reserve is giving out don’t actually do anything, then these companies are going to be a lot further down the road, have a lot of taxpayer money, have a lot more people investing in them when they ultimately do collapse, and it’s just going to make it that much worse. Instead of dealing with it now, letting people know where they stand, and getting it over with.

Paul-Martin Foss: We have no idea where this money is coming from. A lot of it maybe created out of thin air. We don’t know where it’s going. There’s also another disturbing trend, which is the close cooperation between the Treasury and the Fed with no oversight, so it essentially allows the Treasury to funnel money to Wall Street companies, essentially politically favored firms with no public oversight or scrutiny.

But I’ve heard that at staff briefings where people have questions. You know, what exactly the limits of the Fed’s ability to pump money into the system and the Fed folks just flat out said, “Well, there really is no limit because we can create endless amounts of money on paper.”

You know, the Fed just opens up an account on the computer, $100 billion, transfers 50 billion to Wells Fargo, 20 billion to Wachovia, 30 billion to Deutsche Bank, and that money is out there and those banks, you know, they can essentially use it as though it were actual money.

Unfortunately, we keep hearing too from the Obama administration just as we did from the Bush administration renewed calls for the Federal Reserve to take an even more direct and substantive role as a guarantor of financial market stability, at the same time as the Fed’s operations grow ever larger and more opaque.

A lot of opponents of Fed’s transparency will claim that any attempt to oversee the Fed will endanger its independence. But really the Fed is not independent. It does the bidding of its masters, the government and the banks, it devalues the dollar, which enables the government to issue debt to fund its imperialistic adventures abroad and fund welfare state aims here at home, and the bankers just love the system because they get to use this newly created money in credit and they get all the benefit of it.

All the consumers further on down the line who only get to use the money later on [after] basically a rise in prices.

Matthew Hawes: You know, Congress makes a big deal out of having to approve seven hundred-some billion dollars, which is a big deal. But meanwhile, the Federal Reserve, completely on its own off to the side, is doling out trillions of dollars that Congress isn’t voting on.

So we’ve got trillions and trillions of dollars falling out. We’ve got the American taxpayer on the hook for it and yet the Federal Reserve doesn’t have to tell Congress how it’s spending its money and who it’s giving it to. The Federal Reserve doesn’t even have to tell Congress what deals it’s making with foreign central banks and governments.

Paul-Martin Foss: We know that Chairman Bernanke often travels to Europe to meet with his foreign counterparts and we only hear about these meetings by accident.

Early this year, there was this hearing at the very beginning of the session of Congress. Chairman Bernanke was supposed to testify on the Hill. The hearing had to be rescheduled and Chairman Bernanke was no longer able to attend because he was traveling to a meeting in Basel, Switzerland, which is where the Bank for International Settlements is headquartered.

So had the hearing not been rescheduled, we wouldn’t have heard anything about this meeting with the BIS and the BIS does fall in the definition of a non-private international financing organization, so any agreements between the Fed and the BIS are also exempt from GAO audits.

You know, given the fact that the Federal Reserve has been given a monopoly on monetary policy, it has the power essentially to determine the strength and weakness of the dollar, especially in regard to international currencies, et cetera. The fact that they are able to enter into any agreements with foreign governments and central banks without oversight definitely needs to be remedied.

Matthew Hawes: So not only is it committing the American taxpayer to bailing out Wall Street firms and giving all these loans to companies that aren’t on that greater ground is committing the American people to dealing with countries overseas and giving them their money and dealing with these countries in a way that no other branch of government, no other institution of government will be allowed to do.

Paul-Martin Foss: If the State Department or Defense Department were able to enter into agreements with foreign governments with no accountability or send money and troops to foreign countries with no Congressional authorization, we would call these rogue agencies.

So essentially, the Federal Reserve have been acting for a hundred years as a rogue agency and it’s time that Congress correct this mistake, exercise its responsibility for overseeing the Fed and passes HR 1207.

Matthew Hawes: It’s really bipartisan. We’re actually surprised by the number of Democrats who jumped on board. The number keeps shooting up everyday, so I’m not exactly sure where it’s at right now, but we have support all the way from the most conservative member of Congress to some of the most liberal members of Congress, some of the California legislators that are out there, and so it’s really got a broad consensus.

Kevin Brett:At the time of this report, HR 1207 has 143 co-sponsors. It will ultimately need a total of 218 votes to be passed through the House. From Washington, DC, I’m Kevin Brett.