This week the Senate considered a bill that would eliminate the barriers currently standing in the way of a full and fair audit of the Federal Reserve System (what’s commonly called “the Fed”) and the way it conducts the United States' monetary policy.
Currently, unelected officials at the Fed determine how to manage the flow of money and credit through our economy. These same individuals claim that the new levels of transparency contemplated in this bill would threaten the independent nature of the institution.
It’s true that the Federal Reserve was created, in 1913, to be an independent regulatory agency. However, Article I Section 8 of the Constitution empowers Congress to regulate the value of money in our country, a grant of authority that certainly includes the power to investigate monetary policy decisions made by the Fed’s Chairman and Board of Governors.
Yet, as it currently stands, the Fed is unaccountable to Congress and, therefore, to the American people. The bill we voted on this week, introduced by Sen. Rand Paul (R-KY), would bring a modest level of democratic accountability to the institution, by requiring an audit of its transactions with foreign central banks, foreign governments, and international financing organizations.
It would also evaluate deliberations, decisions, or actions by the Fed on monetary policy. While the Government Accountability Office, the Fed’s own Inspector General and an outside auditor, currently engage in periodic audits of the Fed, they are subject to severe restrictions that leave foreign transactions and monetary policy deliberations mostly in the dark.
It is certainly time for the Fed to be more transparent, and it is critical for Congress to assert its constitutional role in oversight of monetary policy.