Auditing the Federal Reserve is More Urgent Than Ever

Julie Borowski

7/24/2012 12:01:00 AM - Julie Borowski

No government institution is more secretive than the Federal Reserve. Believe it or not, the Central Intelligence Agency (CIA) is more transparent than the central bank of the United States. This is a huge cause for concern as the Fed dramatically affects the lives of every single American.

The Fed has never been fully audited in its nearly 100-year history. The American people only got a small glimpse of what happens behind closed doors last July. A watered-down audit conducted by the Government Accountability Office (GAO) revealed $16 trillion in Fed bailouts to banks and corporations around the world at the height of the recent financial crisis.

To put that gigantic number in perspective, the gross domestic product (GDP) of the United States is roughly $15.09 trillion. This means that all of the Fed’s liabilities in a couple years time frame were worth more than the total annual economic activity within the United States.

These bailouts were so secret that even Congress had no idea. Besides the Fed chairman periodically testifying before congressional committees to create the illusion of transparency, members of Congress are not privy to the inner workings of the central bank, let alone the general public.

While the one-time audit mandated by the Dodd-Frank financial overhaul law is a step in the right direction, it isn’t anywhere near enough. The public has the right to know what exactly the Fed is doing with their money. The weak language in the law prohibited auditors from examining how the central bank sets interest rates, agreements with foreign central banks, and other important doings of the Fed.

The limited release of Fed bailout history emphasizes the need for a comprehensive audit where nothing is off-limits. Perhaps $16 trillion in secret bailouts is just scratching the surface of the central bank’s misdoings. The public won’t know for sure until a true audit the Fed bill like Ron Paul’s H.R. 459 is signed into law and enforced by the GAO.

This transparency bill, which he first introduced in 1983, now has 273 cosponsors and will be brought to the House floor sometime this week. With the Texas anti-Fed crusader Ron Paul retiring at the end of his term, the probable passage of his oft-introduced bill in the House will be a bittersweet tribute to his decades-long fight to expose the corruption and immorality of the Federal Reserve System.

Due in large part to the efforts of Ron Paul, more Americans now understand that the Fed actually “spends” more than Congress by printing out trillions of dollars to bail out politically connected banks and corporations. For every additional dollar that the Fed prints, the value of the dollar in our pocket goes down. Prices at the grocery store are going up because the dollar can’t buy what it used to any longer.

This is what will almost inevitably happen when a central bank can print money to its heart’s content. The fiat dollar, meaning that it is backed by absolutely nothing, has lost over 95 percent of its value since the Fed was created in 1913. Everyone probably wishes that they could go back to the days when candy bars cost less than a nickel in the pre-1913 era.

The Fed impacts everyone’s money and daily life, arguably more than Congress. It’s bad enough that most members of Congress voted for the infamous $700 billion TARP bank bailout. The upside is that the American people can vote them out of the office at the ballot box. Utah voters notably held Senator Bob Bennett accountable for his pro-TARP vote and rightfully replaced him with a true constitutionalist named Mike Lee.

But the American people cannot directly fire Fed Chairman Ben Bernanke for $16 trillion in reckless bailouts. Nor they can elect a better head of the Fed. The central bank is run by unelected and unaccountable bureaucrats that have the power to dramatically impact the economy at the drop of a hat.

This kind of unchecked power is antithetical to the limited government principles upon which America was founded. The Fed has continually resisted any kind of congressional oversight, claiming that it would endanger its so-called independence. But the lack of accountability at the Fed cannot be justified with such a poor track record.

An audit of the Fed won’t solve all economic problems. But it is an important first step to expose the severe wrongdoings of the central bank. Once the public reacts to the audit findings and turns against the Fed, the second step in the plan can commence.

An audit is just the first step to ending the crony capitalism that defines the Federal Reserve.