The Federal Reserve Transparency Act of 2009 (H.R. 1207) is a bill introduced in the U.S. House of Representatives of the 111th United States Congress by Congressman Ron Paul (TX-14). The bill proposes a reformed audit of the Federal Reserve System (the "Fed") before the end of 2010. The bill has 317 cosponsors, and has been referred to the Committee on Financial Services. Its Senate version is called the Federal Reserve Sunshine Act of 2009 (S. 604), and it has 30 cosponsors. A related bill uses the same two names in reverse order. An amendment with similar provisions was added to the Federal Stability Improvement Act (H.R. 3996) by the House Committee on Financial Services in November, 2009.
Purpose
According to its short title, the Federal Reserve Transparency Act of 2009 (H.R. 1207) amends Title 31 of the United States Code "to reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported". It strikes exceptions to the audit protocol in 31 U.S.C. § 714 for the Federal Reserve System, the central bank of the United States, and replaces an indefinite deadline with a deadline of December 2010. It also ensures the audit results are available to Congress. The audit would include the Fed's "discount window", its funding facilities, its open market operations, and its agreements with foreign bankers.
Proponents state that the Fed has never been audited by Congress since the Fed's creation in 1913. The Federal Reserve states that "the financial statements of the Federal Reserve Banks and the Board of Governors are audited annually by an independent outside auditor." The bill's sponsor, Congressman Ron Paul (R-TX), counters by stating that the present audit process exempts the Fed's "most crucial activities".
House
Representative Paul introduced the bill to the U.S. House of Representatives of the 111th Congress on February 26, 2009, at which point it was referred to the Committee on Financial Services. Its 11 original cosponsors were Neil Abercrombie (D-HI), Michele Bachmann (R-MN), Roscoe Bartlett (R-MD), Paul Broun (R-GA), Dan Burton (R-IN), Walter B. Jones (R-NC), Steve Kagen (D-WI), Ted Poe (R-TX), Bill Posey (R-FL), Denny Rehberg (R-MT), and Lynn Woolsey (D-CA).
Paul stated to the Congress, "The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the U.S. Government Accountability Office (GAO) is prohibited from auditing or even seeing these agreements. Why should a government-established agency, whose police force has federal law enforcement powers, and whose notes have legal tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight?" He immediately promoted the bill at the annual Conservative Political Action Conference (CPAC) on February 27. Paul charges the Federal Open Market Committee with being "less than transparent" with its secret meetings. In an April 2009 editorial, Paul thanked the Fed for its responsive attempt to enhance transparency and accountability, but called it "window dressing at best, and it's utterly useless at worst".
Progress
An additional 17 representatives signed on to the Transparency Act during the first 18 days, and more continued to do so; after Paul stated several more representatives were pending during Congressional spring break, 16 more representatives cosponsored the bill on April 21, the first day after break. When Campaign for Liberty spokesman Matt Hawes predicted the sponsorship total would reach 92 after the following weekend, the total actually reached 100, with 16 more cosponsors on April 28.
H.R. 1207 now has 317 cosponsors, including all House Republicans, as well as over 100 Democrats, suggesting broad bipartisan support. The total of 317 sponsors is 72% of the House membership. Dennis Kucinich (D-OH) became the 218th sponsor as listed at THOMAS.gov on June 11; 218 votes are needed to pass any bill in the House, and 290 were needed for a veto-proof majority. Barney Frank (D-MA), Chairman of the House Committee on Financial Services through which the bill must pass, finally endorsed the bill in August following months of silence. Frank later reversed his position on the bill after the Watt amendment was rejected and Watt's revisions undone by an amendment co-sponsored by Paul and Florida Democrat Alan Grayson.
Amendment to Financial Stability Improvement Act of 2009 (HR 3996)
On November 19, 2009, the Committee on Financial Services approved the Paul-Grayson amendment to the Financial Stability Improvement Act of 2009 (H.R. 3996). The amendment includes many provisions of the Federal Reserve Transparency Act, including removing GAO audit restrictions and allowing a more complete audit of the Federal Reserve, including reviewing various policies and agreements with foreign entities. It was passed by in a 43-26 vote, with bipartisan support despite opposition from former supporter and Committee Chairman Barney Frank. The amendment was also opposed by Federal Reserve Chairman Ben Bernanke, Treasury Secretary Tim Geitner and others from the Obama administration.
Frank declined to vote for the final bill after proposed changes made by fellow Democrat Melvin Watt representing North Carolina's 12th congressional district, which encompasses most of Bank of America hometown Charlotte, were stripped out in favor of the amendment's original language by the amendment proposed by Paul and Grayson. Watt's proposed version included provisions that allowed audits of the Fed's balance sheet, but not for the monetary policy. Ryan Grim, a contributor for the left-leaning news blog The Huffington Post suggested Watt's amendment was an attempt to create less transparency than before at the Federal Reserve.
Senate
On March 16, 2009, U.S. Senator Bernie Sanders (I-VT) introduced the Senate companion version, S. 604, the Federal Reserve Sunshine Act of 2009, with the same provisions; this version was then referred to the Committee on Banking, Housing, and Urban Affairs. The bill currently has 30 co-sponsors.
Currently, Senator Mary Landrieu (D-LA) is the leading representative against the legislation. She has stated that increased transparency of the Federal Reserve would limit the inflation rate, and force the Congress to raise taxes in order to finance the welfare state.
Senate Amendment 1367
On July 6, 2009, U.S. Senator Jim DeMint attempted to amend HR 2918, the Legislative Branch Appropriations Act by adding the entire text of S. 604 as Senate Amendment 1367. However, U.S. Senator Ben Nelson stopped the amendment by claiming it violated Senate Rule 16, by "legislating" on an appropriations bill. The Senate president agreed, but when challenged by DeMint, admitted that many other GAO audits in the bill also violated Rule 16, but took no action. The bill passed without further changes.
Related legislation
The two titles for these two versions of the bill are not to be confused with the same two titles (used in reverse) for the two versions of a related bill. The House "Federal Reserve Sunshine Act of 2009" by Paul (H.R. 1348), and the Senate "Federal Reserve Transparency Act of 2009" by Sanders (S. 513), require the Federal Reserve to publish information on financial assistance provided to various entities during the 2008 Bailout. This bill creates a website listing all banks that have borrowed from the Fed since March 24, 2008, and the amount, terms, and "specific rationale" of the loans. Sanders commented, "I have a hard time understanding how you have put $2.2 trillion at risk without making those names available." Fed chair Ben Bernanke had told Sanders that publishing the names would make the banks feel stigmatized and potentially reluctant to borrow further.
Reception
Glenn Beck of Fox News mentioned the Transparency Act while discussing ways for the average person to remind Congress, "Hey, you work for me". The Motley Fool group economics blog called the bill "the first attempt at a true audit of the Federal Reserve since its inception in 1913" and affirmed Paul's Congressionally published column describing his legislation. http://en.wikipedia.org/w/index.php?title=Federal_Reserve_Transparency_Act&action=edit§ion=8 The Centro Studi Monetari says a similar audit law is desired in Italy to publish the budgets of banks like Bankitalia.
GoldSeek.com commentator Jake Towne believes that Fed transparency in relation to credit derivatives will probably happen naturally, citing the Transparency Act cosponsorship of 58 legislators and the Fed's urging major members and funds to list their derivatives on a New York City exchange.
Senator Judd Gregg called the Paul-Grayson amendment "pandering populism", saying the audit requirements would be detrimental to monetary policy. Gregg added that "It's great PR; you go home and beat up the Fed."
Advocacy
Support for the Federal Reserve Transparency Act of 2009 was one of the issues rais
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