Auditing the Federal Reserve

Representative Ron Paul of TX has introduced the Federal Reserve Transparency Act of 2009, a bill which essentially opens the workings of the Federal Reserve to Congressional audit but not control. It's a hugely popular bill on OpenCongress.

Proponents of shielding the Federal Reserve from meaningful disclosure and oversight justify their position by arguing that "the Fed" should be able to complete its work without political pressure, especially pressure to take short-term actions counter to particular long-term policies. There's some value to that, in the sense that in many cases the actions necessary to preserve economic stability and/or growth in the long term may be unpopular in the short term.

However, it's ultimately in the democratically-elected Congress where the nation can debate its long term goals, and when necessary, the tactics required to achieve them. As it stands, we can only trust the Reserve to take its actions without fear of audit; this is disturbing because we the people end up paying for loose or tight monetary policy and its "lending as a last resort". Because their actions spend or encumber our tax dollars (now or future), we taxpayers should have the power to determine (at least post facto) if the short-term tactical decisions make sense.

As Justice Brandeis once said, "Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants ...". The Federal Reserve is not a sausage factory; it in part implements policy by regulating its member banks. It's responsible to the Federal Government, and as such, should expect to be audited by elected officials.