Yesterday shocked everyone. In an unprecedented move, the House Financial Services Committee voted to approve an amendment by Ron Paul and Alan Grayson to audit the Federal Reserve — the first time anything like this has happened in the Fed’s history.
A push is already under way to remove the amendment on the House floor. Scott Lanman of Bloomberg:
Fed Chairman Ben S. Bernanke has opposed the Paul legislation, saying it may result in interference with monetary policy.
“It’s going to be seen as weakening the independence of monetary policy with consequent negative implications,” Barney Frank, the Massachusetts Democrat who chairs the committee, told reporters after the vote. “People are going to be worried about the impact on the dollar, on the interest rate.”
Frank, who opposed the Paul measure, said the issue “may be revisited” when the legislation reaches the House floor.
Dean Baker laughs at the idea that the Fed is “independent” when phone records for Timothy Geithner during his time at the NY Fed show that he was in constant contact with bankers. What we effectively have is a system where the private banks conduct monetary policy for their own benefit away from the prying eyes of the public.
But it’s clear that there is going to be an incredibly strong full-court press by the banks, by Timothy Geithner and Larry Summers and by the Fed itself to undo this. They thought they had it in the bag with the Watt Amendment, which would have made the Fed even more opaque, but a last minute push by progressives helped Grayson garner the votes he needed. As the Huffington Post notes, the letter we circulated signed by progressive leaders in support of the bill was “key” to Grayson’s ability to whip Democratic votes.
It was an incredible defeat for the banks, who have been able to write their own ticket by orchestrating the bailouts, controlling the Federal Reserve and demanding their divine right to profiteer while the unemployment rate skyrockets.
We’re proud of the role we played in this effort. It’s time we stop bailing out Wall Street and start investing in Main Street. But we need your support to help make that happen.