Opening Up the Books

It appears the Bernie Sanders amendment to audit the Federal Reserve will get a vote in the Senate today. There may also be a vote on a more stringent amendment introduced by David Vitter, which mirrors the original Paul-Grayson bill in the House. Vitter introduced his version late last week after Sanders appeared to water down his amendment in various ways.

It's true that the current Sanders amendment is a bit weaker than its original version. (The tell was when Chuck Schumer, grinning, put his arm around Sanders on the Senate floor after Sanders announced "changes" to his amendment.) It's essentially a one-off disclosure of the recipients of various Fed lending programs since December 2007. If this is to be an "audit" in any true sense, it needs to be both recurring and comprehensive. Under the current Sanders amendment, the Fed could tidy up its files and indulge the GAO for a few months, then go back to business as usual knowing that the current unlikely coalition of audit supporters would have to come together again in the future to marshal support for another congressional vote. The main benefit of any regular audit is deterrence, which a one-time disclosure lacks. If the Sanders amendment passes, the extent to which it can be strengthened later on -- either in conference or as a result of what the disclosure eventually reveals -- will be key.

But it's important not to lose sight of the big picture and how historic all this is. The audit issue has attracted a lot of passionate supporters among the public, many of whom are new to the issue of monetary policy. Few of them probably remember when the Fed would meet to set rates and not even announce what it had decided. Everyone would have to watch what the big banks did afterwards and wait desperately for Salomon's Henry Kaufman to interpret it all for the masses. Despite some superficial nods to modernity in recent years -- only in the context of Fed history could releasing FOMC transcripts after six years be considered "transparent" -- secrecy and lack of accountability have always defined the most important parts of the Fed's work. For those with perspective, it is extraordinary that the audit's prospects have advanced this far.

While the conditions for that obviously have been favorable, the real credit belongs to a fairly small group in Congress that has either pushed the audit specifically or brought needed attention to the Fed and monetary policy in general. Some of the names are Bunning, DeMint, and of course Sanders, Paul, and Grayson. These are patriots -- did I just say that about Bernie Sanders? -- who in some cases, like Bunning and Paul, have focused on these issues for many years when no one else cared. They are doing work that in the past would have been considered not only futile but perilous. Especially for members like Grayson, who is in a tough district, their constituents should know that at least on issues of financial reform and monetary policy they are extremely well-represented. If the audit reveals what some suspect, it will be a career-maker for its fresher supporters including Grayson and a fitting coda for warriors like Bunning and Paul.