Monday, January 11, 2010

Audit the Fed and Do it Now

Most people have no clue how the Federal Reserve System works. How does it really create money? Does it REALLY set interest rates?

Here is an excellent analysis of Fed operations first by Steve Forbes (obviously of FORBES magazine) and then in an interview conducted by Forbes with Congressional Representative and former Presidential candidate Dr. Ron Paul on why the Fed needs more transparent accounting.

For the record, I am not a Ron Paul supporter. I disagree with him on too many key political issues to want him in the Oval Office. But on the Fed and its disastrous record since 1913 he is dead right and I applaud him for his leadership in this area while so many in Congress are asleep at the wheel.

The case for stricter auditing review (but not Congressional oversight) of the Fed's balance sheet comes right out of the headlines given the latest controversy regarding AIG credit default swaps and how then New York Fed chief Timothy Geither (now Secretary of the Treasury) seems to have misled bankers over the value of these derivatives.

What is the cost to taxpayers of this massive blunder and potentially criminal act?

$17 billion lost through overpayments.

Representative Ron Paul has taken the leadership on this issue through his bill, HR 1207, or The Federal Reserve Transparency Act of 2009. The bill essentially allows GAO audits of the Fed's books. Here is a clip from YouTube where Paul himself discusses HR 1207.

Here is the official Congressional history of HR 1207 and its Senate counterpart, S 604, The Federal Reserve Sunshine Act of 2009. Lots of people want to audit the Fed. Check out the long list of cosponsors from every side of the political aisle.

The bottom line here is very simple. If you want predictable and stable interest rates, the nation needs to reign in an out-of-control Federal Reserve System that is printing money like, well, a central bank that has no limits, no checks, and no accountability.

Who can REALLY make the case that we should not have accurate financial statements from the Fed and its $2 trillion (and rapidly growing) balance sheet? Well, even today the Fed itself is attempting to make just this case and it should be ashamed of itself for trying to keep Fed screw ups secret and hidden from the public.

Robert J. Abalos, Esq.