Even as President Barack Obama’s nominee to chair the Federal Reserve is committed to transparency, Janet Yellen is opposed to an audit of the central bank’s monetary policy decisions.
Sen. Rand Paul (R-KY) has proposed legislation that would subject the Federal Reserve to a full audit by the Government Accountability Office (GAO), offering Congress a look at the internal operations of the famously opaque institution. Tea partiers like Paul aren’t the only people who support an audit: the proposal has also garnered support among labor leaders such as AFL-CIO president Richard Trumka, progressive economists like Dean Baker, and Congressional liberals such as Rep. Alan Grayson, D-Fla.
Paul has threatened to block Yellen’s nomination unless his proposal for a Fed audit gets a vote in the Senate. His office did not respond to a request for comment on Yellen’s remarks.
Yellen, who currently serves as vice chair of the Federal Reserve, also indicated during the confirmation hearing that her tenure would not represent a significant break from that of outgoing chair Ben Bernanke. She defended the Fed’s policy of buying Treasury bonds as a form of economic stimulus and hinted that she would continue with policies in that vein if confirmed.
The Federal Reserve has only been audited once in 2010 after the proposal for a one time only audit, sponsored by Sen. Bernie Sanders, was attached to the Dodd-Frank Finance Reform bill. That audit revealed trillions in secret bailouts to banks around the world.
“This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else,” U.S. Senator Bernie Sanders, an Independent from Vermont, said in a statement.
The majority of loans were issues by the Federal Reserve Bank of New York (FRBNY). [..]
The report notes that all the short-term, emergency loans were repaid, or are expected to be repaid.
The emergency loans included eight broad-based programs, and also provided assistance for certain individual financial institutions. The Fed provided loans to JP Morgan Chase bank to acquire Bear Stearns, a failed investment firm; provided loans to keep American International Group (AIG), a multinational insurance corporation, afloat; extended lending commitments to Bank of America and Citigroup; and purchased risky mortgage-backed securities to get them off private banks’ books. [..]
Some of the financial institutions secretly receiving loans were meanwhile claiming in their public reports to have ample cash reserves, Bloomberg noted.
The Federal Reserve has neither explained how they legally justified several of the emergency loans, nor how they decided to provide assistance to certain firms but not others.