Ron Paul at Cato on Federal Reserve Transparency

I posted this on my blog over at Bureaucrash Social, but since that's a password-gated community right now, I'm re-posting it here. Enjoy!

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The Cato Institute hosted three speakers this Wednesday in the F. A. Hayek Auditorium in its DC office. The topics under discussion were Dr. Paul’s bill to audit the Federal Reserve (HR 1207) and the relationship between the Federal Reserve, the private sector, Congress, and the Treasury.

Dr. Paul’s bill would expand the GAO’s authority to audit the Federal Reserve. The current law, originally passed in 1978, allows only a limited audit process. For instance, the Federal Reserve’s dealings with foreign central banks are not currently subject to audit. HR 1207 removes this and other restrictions, fully opening the Fed’s books to public scrutiny. Dr. Paul stressed that the bill wouldn’t allow Congress to interfere in the Fed’s decision making process; it only makes a full record of the central bank’s activities publicly available.

Appearing on the panel with the Texan congressman were Gilbert Schwartz of Schwartz & Ballen LLP, formerly Associate General Counsel to the Federal Reserve, and Bert Ely, president of Ely & Company, Inc.

Schwartz emphasized that while the Federal Reserve and other agencies were partially to blame for the financial crisis, Dr. Paul’s bill was unnecessary at best and at worst had the potential to hurt the economy by undermining the Federal Reserve’s independence. He pointed out that although the Fed lending to private sector institutions outside of the banking industry is unusual, it is not unprecedented and is authorized by law. Section 13(3) of the Federal Reserve Act authorizes the Fed to lend to businesses “in unusual and exigent circumstances,” and was used to lend to farmers and other business owners in the 1930s. Schwartz also pointed out that some of the expansion in the monetary base has been undercut by $700 billion in increased deposits with the Fed. Although by Schwartz’s admission, the Fed might be criticized for a lack of openness, he saw its intervention as instrumental to preventing a total economic collapse, citing the chaos caused by the collapse of Lehman Brothers as evidence.

The third member of the panel, Bert Ely, pointed out how the balance sheets of the Fed and the Treasury are interconnected and identified several areas where current policy could be reexamined. His central question was whether the Fed’s power to lend to private industry without Congressional approval should exist at all, and whether it makes sense for that power to rest with the Fed rather than another agency such as the Treasury. Ely said that Congress should address these questions and, depending on the answers, change existing laws.

Congressman Paul posed a question which he challenged opponents of his bill to answer. “Why not?” Most objections to an audit don’t hold water. Merely opening the Fed’s books is not an assault on its independence. Concerns that an audit would endanger the trust foreign central banks have in the Fed are based on a slippery-slope scenario where auditing leads to meddling. Paul pointed out that the Fed is losing trust anyway, for reasons unrelated to an audit, and that we shouldn’t be more afraid of exposing the truth than we are of the consequences of potentially shrouding the Fed’s failures in secrecy. The other main argument against an audit is that making the Fed’s internal discussions public would upset the marketplace in ways the Fed would not intend. Paul pointed out that under the current system, rampant guessing surrounds every meeting of the Fed’s directors, and that this has much the same effect. Schwartz added that there was a time when the Fed didn’t even release its interest rate target as determined at an internal meeting until months or years afterwards, and there were doomsday predictions about the effect that making the information known immediately would wreak havoc with the economy. These predictions haven’t panned out, Schwartz said, and there’s no reason to suspect that additional transparency would cause any more speculative behavior than exists currently.

In short, the bill is a common-sense measure. Where disagreements exist, they’re about what to do next. Paul wants to legalize competing currencies; practically, this would mean allowing people to pay their debts in gold and to enter into contracts with payments denominated in gold. He predicts that monetary reform is coming whether we like it or not, and that to prepare, we need to have information about what went wrong in the past as well as a failsafe in the form of a legal competing currency. Regarding the current monetary regime, Paul simply said “this system has ended.” He sees a chain of central bank failures dating back to the Fed’s creation in 1913 as ample evidence, and said of our current crisis, which he views as another failure of the Federal Reserve System, “this is the big one.”

Schultz had a different take. He said that the message that more transparency is needed is getting to the Fed, and said of Paul’s bill, “I’m not sure this legislation corrects the problem.” Ely said that future actions should take into account the many different roles the Fed plays, and that each role should be examined separately.

Regardless of which direction Congress decides to go with monetary policy reform, it is clear that the issue of the Federal Reserve’s role is going to be a part of the national dialogue moving forward. HR 1207 would provide a basis for that discussion. Once we know what the Fed has been up to, we’ll have a better idea of what to do next. Said Paul, “That’s when we’ll have a lot more fun."

An audio recording of the event is available at http://www.cato.org/event.php?eventid=6279.

HR 1207: The Cosponsorship Continues

I've let the HR 1207 saga slide a bit, since its been covered extensively by other outlets. I didn't want to let this tidbit pass by unrecorded, however.

A majority of House members now cosponsor the bill!

Also, the Senate version (sponsored by Bernie Sanders) has gained its first cosponsor, Jim Demint (R-SC). The battle now shifts to getting the house bill to the floor and building momentum behind the Senate version.

HR 1207: A Small Personal Victory

The Campaign for Liberty has designated today a "Mass Action Day" for HR 1207 activism.

I just got off the phone with the offices of Representative Doyle and Senator Casey. I didn't bother to call Senator Specter, I feel like his office is totally inundated with noise right now. Congressman Doyle's office gave me a polite acknowledgment, as has been my experience in the past.

What I heard when I called Senator Casey made my day.

I spoke with a fellow named Joe, if I remember correctly. I explained that I hoped the Senator would consider cosponsoring S513, a bill which would allow the GAO to audit the Federal Reserve. I added that it was the Senate version of HR 1207, since the House bill seems to have more name recognition.

Joe asked me if I was referring to Ron Paul's bill. I said that yes, he has done a lot of advocacy on the issue and is the sponsor in the House. I added that the Senate version is sponsored by Bernie Sanders and cosponsored by Senators Feingold and Lincoln.

This was Joe's reply, as closely as I remember it: "To be perfectly honest with you, this isn't an issue I've asked the Senator about yet. But I feel like we've reached a threshold now where it is something I should bring to his attention."

I thanked Joe, and said that support for the bill would go a long way towards showing the Senator's commitment to openness and accountability.

How encouraging! Keep the ball rolling, everyone!

HR 1207: The Crazy 88

Ron Paul's Campaign for Liberty is reporting that HR 1207 is sitting on 88 cosponsors and counting. This was after a jump to 71 cosponsors yesterday, when Congress returned to session. That's a jump of 33 congresspeople since I last reported on the issue.

Not all of the new cosponsors are listed on the Library of Congress's site yet, but here's the ones that are:

Rep Lucas, Frank D. [OK-3] - 4/21/2009
Rep Lamborn, Doug [CO-5] - 4/21/2009
Rep Ehlers, Vernon J. [MI-3] - 4/21/2009
Rep Bilbray, Brian P. [CA-50] - 4/21/2009
Rep Pence, Mike [IN-6] - 4/21/2009
Rep Manzullo, Donald A. [IL-16] - 4/21/2009
Rep McCaul, Michael T. [TX-10] - 4/21/2009
Rep Cole, Tom [OK-4] - 4/21/2009
Rep Roe, David P. [TN-1] - 4/21/2009
Rep Herger, Wally [CA-2] - 4/21/2009
Rep Bishop, Rob [UT-1] - 4/21/2009
Rep Baldwin, Tammy [WI-2] - 4/21/2009
Rep Olson, Pete [TX-22] - 4/21/2009
Rep Latham, Tom [IA-4] - 4/21/2009
Rep Luetkemeyer, Blaine [MO-9] - 4/21/2009
Rep Doggett, Lloyd [TX-25] - 4/21/2009
Rep Rooney, Thomas J. [FL-16] - 4/22/2009
Rep Massa, Eric J. J. [NY-29] - 4/22/2009
Rep Johnson, Sam [TX-3] - 4/22/2009
Rep Thompson, Glenn [PA-5] - 4/22/2009
Rep Brady, Kevin [TX-8] - 4/22/2009
Rep Smith, Adam [WA-9] - 4/22/2009
Rep Shimkus, John [IL-19] - 4/22/2009
Rep Graves, Sam [MO-6] - 4/22/2009

Those of you doing research will find it helpful to know that David Roe goes by his middle name, Philip. We picked up four more Democrats with this update: Baldwin, Doggett, Massa, and Smith. It's always nice to have Adam Smith on your side on a piece of economics legislation.

Campaign for Liberty believes the number of cosponsors will continue to rise over the next few days.

The Senate version of the bill still has no cosponsors listed on THOMAS.

HR 1207: In Which The Library of Congress is Unreliable

So apparently there were some clerical errors which led to three Democrats being listed as cosponsors of HR 1207 when they were in fact never cosponsors. Bummer.

Scratch Keith Ellison, Henry Waxman, and Louise Slaughter from your list of people who pass the awesome test. The current cosponsor count remains 55, however, since 3 more congressmen have signed on.

Rep Fallin, Mary [R, OK-5] - 4/2/2009
Rep Smith, Lamar [R, TX-21] - 4/2/2009
Rep Westmoreland, Lynn A. [R, GA-3] - 4/2/2009

HR 1207: 9 More Cosponsors, Jefferson's Quran

More cosponsors! How exciting.

Rep Paulsen, Erik [R, MN-3] - 3/30/2009
Rep Gingrey, Phil [R, GA-11] - 3/30/2009
Rep Terry, Lee [R, NE-2] - 3/30/2009
Rep Carter, John R. [R, TX-31] - 3/31/2009
Rep Capito, Shelley Moore [ R, WV-2] - 4/1/2009
Rep Wittman, Robert J. [R, VA-1] - 4/1/2009
Rep Slaughter, Louise McIntosh [D, NY-28] - 4/1/2009
Rep Ellison, Keith [Democratic-Farmer-Labor Party, MN-5] - 4/1/2009
Rep Waxman, Henry A. [D, CA-30] - 4/1/2009

This brings the total to 55. The biggest obstacle at this point will be getting enough support from Democrats that Barney Frank (head of the committee to which the bill was referred) and Nancy Pelosi allow it to come to the House floor for consideration. Rep. Paul has said on several occasions that should the bill come to a vote, it would almost surely pass. The challenge is getting it past the gatekeepers.

Meanwhile, Vermont's Bernie Sanders has introduced an identical bill in the Senate. Sanders is an independent who caucuses with Democrats. The Senate version of the bill was introduced on March 16th and referred to the Senate Committee on Banking, Housing, and Urban Affairs.

A word about Keith Ellison: this guy is pretty awesome. He's the first Muslim to be elected to Congress. I don't tend to go for identity politics, but whatever. He's pretty awesome regardless of his religion. He co-sponsored Kucinich's bill to impeach Dick Cheney, for example. The really cool thing, though? For his "swearing-in reenactment photo op" (actual swearing in is done en masse, without any books around) he used a copy of the Quran owned by Thomas Jefferson. Apparently Jefferson picked up a copy while he was studying for the bar.

A word about former member of the House Virgil Goode: all I have to say about this bigot is "Goode riddance." Goode issued a statement on the matter which read in part "If American citizens don't wake up and adopt the Virgil Goode position on immigration there will likely be many more Muslims elected to office and demanding the use of the Quran." Because only Christians are allowed to be "REAL 'MERICANS." Clearly. There are a lot of good reasons to consider closing our borders. Hateful jingoism shouldn't be considered among them. The stinger? Ellison is a natural born citizen.

HR 1207: An Introduction

Congressman Paul has introduced legislation in the house to facilitate an audit of the Federal Reserve by the GAO (the office headed by the Comptroller General). The current law insulates the Fed from any serious auditing. The bill currently has 46 cosponsors.

Rep Abercrombie, Neil [D, HI-1] - 2/26/2009
Rep Akin, W. Todd [R, MO-2] - 3/19/2009
Rep Alexander, Rodney [R, LA-5] - 3/10/2009
Rep Bachmann, Michele [R, MN-6] - 2/26/2009
Rep Bartlett, Roscoe G. [R, MD-6] - 2/26/2009
Rep Blackburn, Marsha [R, TN-7] - 3/16/2009
Rep Blunt, Roy [R, MO-7] - 3/24/2009
Rep Broun, Paul C. [R, GA-10] - 2/26/2009
Rep Buchanan, Vern [R, FL-13] - 3/17/2009
Rep Burgess, Michael C. [R, TX-26] - 3/19/2009
Rep Burton, Dan [R, IN-5] - 2/26/2009
Rep Castle, Michael N. [R, DE] - 3/17/2009
Rep Chaffetz, Jason [R, UT-3] - 3/6/2009
Rep Culberson, John Abney [R, TX-7] - 3/26/2009
Rep Deal, Nathan [R, GA-9] - 3/23/2009
Rep DeFazio, Peter A. [D, OR-4] - 3/9/2009
Rep Duncan, John J., Jr. [R, TN-2] - 3/6/2009
Rep Fleming, John [R, LA-4] - 3/18/2009
Rep Foxx, Virginia [R, NC-5] - 3/10/2009
Rep Franks, Trent [R, AZ-2] - 3/23/2009
Rep Garrett, Scott [R, NJ-5] - 3/5/2009
Rep Grayson, Alan [D, FL-8] - 3/11/2009
Rep Heller, Dean [R, NV-2] (R) - 3/6/2009
Rep Jones, Walter B., Jr. [R, NC-3] - 2/26/2009
Rep Kagen, Steve [D, WI-8] - 2/26/2009
Rep Kingston, Jack [R, GA-1] - 3/6/2009
Rep Lummis, Cynthia M. [R, WY] - 3/19/2009
Rep Marchant, Kenny [R, TX-24] - 3/11/2009
Rep McClintock, Tom [R, CA-4] - 3/6/2009
Rep McCotter, Thaddeus G. [R, MI-11] - 3/19/2009
Rep Miller, Jeff [R, FL-1] - 3/24/2009
Rep Peterson, Collin C. [D, MN-7] - 3/19/2009
Rep Petri, Thomas E. [R, WI-6] - 3/10/2009
Rep Platts, Todd Russell [R, PA-19] - 3/19/2009
Rep Poe, Ted [R, TX-2] - 2/26/2009
Rep Posey, Bill [R, FL-15] - 2/26/2009
Rep Price, Tom [R, GA-6] - 3/10/2009
Rep Rehberg, Denny [R, MT] - 2/26/2009
Rep Rohrabacher, Dana [R, CA-46] - 3/6/2009
Rep Sessions, Pete [R, TX-32] - 3/23/2009
Rep Stark, Fortney Pete [D, CA-13] - 3/26/2009
Rep Stearns, Cliff [R, FL-6] - 3/6/2009
Rep Taylor, Gene [D, MS-4] - 3/6/2009
Rep Wamp, Zach [R, TN-3] - 3/16/2009
Rep Woolsey, Lynn C. [D, CA-6] - 2/26/2009
Rep Young, Don [R, AK] - 3/6/2009

8 of these 46 are Democrats, which is nice, if you care about that sort of thing. I'm of the opinion that the Democrats and Republicans are basically the same party anyway, but I'm pretty sure most people in office disagree, so it says something when a congressperson is willing to look past deeply ingrained prejudices and cosponsor a bill from the opposition.

The bill is very short, only a page or two. I encourage you to look it up at the Library of Congress's website.

Okay, so why should anyone care? Well, for starters, the bill's author predicted the housing crisis in 2003. Check out Congressman Paul's statements before the House Financial Services Committee. Furthermore, the Federal Reserve is at the center of the current economic maelstrom. It's essentially a fourth branch of government and is accountable to nobody. I personally don't believe that we need a central bank controlling the economy, but its hard to debate the subject when no one has any idea what the Federal Reserve has done and is doing. Congressman Paul is the ranking member on Financial Service's subcommitee responsible for overseeing monetary policy--i.e. Federal Reserve actions--and has repeatedly said that the Federal Reserve is more secretive than the CIA (ex. this interview).

I could continue to talk about the role of the Fed in the economy and the ways central economic planning hurts us, but that would only complicate the issue. This is about opening up an exceptionally secretive part of government to Congress and the citizens of the US--and that's something that everyone should get behind.

More on this as it develops.