Senator Judd Gregg Vows to block FED Audit Bill

A U.S. senator said he would seek to block any legislation containing a measure to remove the Federal Reserve’s shield from congressional audits of the central bank’s interest-rate decisions.

The House Financial Services Committee yesterday advanced a proposal requiring audits of the Fed that was introduced by Representative Ron Paul, a Republican from Texas. Senator Judd Gregg, a New Hampshire Republican and Banking Committee member, said in an interview today that the measure “would do fundamental damage to the strength of our financial structure as a nation.”

“I would not vote for any bill and I would filibuster any bill that had this language in it,” Gregg said, referring to the legislative delaying tactic that requires 60 Senate votes to break.

Gregg’s comments indicate that legislation similar to Paul’s bill, which has more than 300 House co-sponsors, would face resistance in the Senate. That would help the Fed, which opposes the bill on the grounds that it could reduce the central bank’s independence in setting interest rates.

California Representative Brad Sherman, the highest ranking Democrat on the House panel to vote for the Paul amendment yesterday, said in an interview that he expected the provisions to be altered “to some degree” as legislation moves through the House and Senate.

‘Terribly Popular’

“If it’s changed a whole lot, could that imperil the bill’s ultimate passage? Yes,” Sherman said. The Paul audit bill won’t be “terribly popular” in the Senate, he said.

Paul, author of a book entitled “End the Fed” that was published this year, said yesterday that provisions in his amendment would limit interference in monetary policy. The measure, co-sponsored by Representative Alan Grayson, a Democrat from Florida, would exclude any unreleased transcripts or minutes of Fed policy meetings. It calls for an audit of the Fed and its 12 regional banks by the Government Accountability Office within a year after enactment.

The committee voted first, 43-26, to substitute Paul’s proposal for a Democratic measure to retain the ban on audits of monetary policy while requiring more limited audits. Fifteen of 42 Democrats joined the unanimous Republicans on the vote. Then, in a voice vote, the committee attached the Paul measure to the broader bill.

Failed to Sway

A call from Fed Chairman Ben S. Bernanke two days ago failed to sway Representative David Scott, a Democrat from Georgia, who voted in favor of Paul’s measure.

“I said to him that what we’re interested in doing is sending the right signals to Main Street,” Scott said. “The American people are totally dissatisfied with the way the Fed, this administration have so over-handed, disproportionately leaned toward helping the top of the economic stream.”

Representative Barney Frank, the Massachusetts Democrat who chairs the committee and opposed the Paul measure, said yesterday the issue “may be revisited” when the legislation reaches the House floor.

“It’s going to be seen as weakening the independence of monetary policy with consequent negative implications,” Frank told reporters after the vote. “People are going to be worried about the impact on the dollar, on the interest rate.”

Frank said he expects to finish the legislation in committee on Dec. 1, delaying a vote he had scheduled for yesterday until after lawmakers return from the Thanksgiving holiday. He supported a competing measure from Representative Mel Watt, a North Carolina Democrat, to retain the ban on auditing monetary policy.

Make the Case

“The Fed needs to make the case for policy independence,” said former St. Louis Fed President William Poole, now a senior fellow at the Cato Institute in Washington. “The right place for the policy audit” is congressional hearings on monetary policy, not through the GAO, Poole said.

Gregg, 62, who was elected in 1992 and plans to retire from the Senate next year, attributed the Paul legislation’s success to “populist fervor” and lawmakers “pandering” to the public.

If the audit provisions become law, “you will fundamentally harm the stability of the dollar and our ability to fight inflation, because the Fed’s ability to deal with interest rates will be chilled by the fear of congressional oversight,” Gregg said.

BLOOMBERG

Ron Paul Against More Power for FED

Treasury Secretary Timothy Geithner has publicly stated that he wants to give the Federal Reserve Bank more power. Dr. Ron Paul of Texas totally disagrees as he wants to reduce the Fed’s power and actually audit the Fed. Paul’s book “End the Fed” remains extremely popular as many Americans are tired of seeing Wall Street bailed out with money that is printed out of thin air by the Federal Reserve Bank.

In a national poll almost 75% of Americans voted that the Federal Reserve Bank needs to be audited. Currently over two thirds of Congress supports Ron Paul’s bill to audit the Fed. There are 309 co-sponsors of the bill with 130 of those being Democrats so it is a very bi-partisan bill. Dr. Paul feels that the Fed has avoided the tough questions and no one really knows where all of this printed money is going.

If taxpayers continue to foot the bill for bailouts then they should know where the money is going. Unfortunately there has never been a system to audit the Fed. Another issue that Dr. Paul has with the Fed is that the paper currency they are printing is not backed by any type of physical commodity. There is nothing in law that states that one dollar is actually worth one dollar. There is actually no definitely of a dollar as it is just a piece of paper currency with ink on it. With no backing by physical commodities Paul feels that the dollar is worthless. If the Fed gets more power they will continue to print paper currency and the value of the dollar will continue to decline.

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