Senate calls for audit of three years of Fed deals -- Full policy will stay behind 'closed doors'

While the Democrats in the Senate rejected Republican efforts to reform Fannie Mae and Freddie Mac, they did pass this audit bill which looks good on the surface but doesn't look like it goes far enough. This bill stops short of demanding a full review of the Fed's future monetary policy. Why? What don't the Democrats want out in public about the Fed? Why did they defeat a bill calling for an ongoing audit and instead limiting it to a one time audit.

We still do not know what will come out of the Conference Committee of the House and Senate as the two Houses differ on the bills they have passed. According to reports they expect Obama to push the Senate bill which is more limited. We are not surprised at that because it is in keeping with the Obama Administration lack of transparency we have been witnessing.

The House has passed a financial reform bill that includes broad authority for the U.S. comptroller general to conduct an ongoing examination of the Fed's activities.

Mr. Sanders' proposal would limit the comptroller general's examination to the Fed's lending activities from Dec. 1, 2007, to the present and require a report back to Congress by December. Mr. Sanders' amendment also would require auditors to see whether members of the Federal Reserve Board of Governors have a conflict of interest in how they do their jobs.

Mark A. Calabria, director of financial regulation studies at the Cato Institute, said senators acted on what has incited the most anger, which meant auditing past bank bailouts, but didn't want to tread on the more complex parts of Federal Reserve policy.

"The fact is that most of Congress does not understand monetary policy. The thing that was least transparent, least understood, so arguably most in need of an audit, was taken off the table," Mr. Calabria said.

The House and Senate versions will have to be squared in an eventual conference, where President Obama is likely to weigh in heavily against a full audit and instead back the Sanders proposal.

Why doesn't Obama want a full audit? What is he afraid they are going to find?

As for Democrats not wanting to go into Fannie Mae and Freddie Mac right now, we are not shocked as this is an election year and the last thing they want is to have the facts come about about these two government programs. Even though they say they will look at them later to determine what needs to be fixed, they have no intention of doing it this year. Don't think the Democrats will have to worry as come January there is a good chance that Barney Frank who has protected these two organizations will no longer be Chair of the Committee overseeing them and something will actually get done so we can quit wasting tax dollars on the two. The vote in the Senate to have enhanced regulation of Fannie Mae and Freddie Mac introduced by Senator McCain (R-AZ) was defeated 56-43 with Democrat Senators Feingold (D-WI) and Bayh (D-IN) voting for the McCain bill.

Senate calls for audit of three years of Fed deals
Full policy will stay behind 'closed doors'

By Stephen Dinan

Senators demanded Tuesday to be let in on what they called the most secretive, powerful federal agency in existence, voting overwhelmingly to audit the loans and deals the Federal Reserve made over the past three years but stopping short of demanding a full review of the Fed's future monetary policy.

The 96-0 vote for a one-time audit reflects the growing distrust of government - fueled by populists on the left and Rep. Ron Paul and libertarians on the right, who say they've been betrayed by the Wall Street-Washington financial consensus that has governed policy for two decades.

"The average American is beginning to wonder what goes on behind closed doors with the Fed," said Sen. Bernard Sanders, Vermont independent.

He said he began seeking an audit after being stonewalled by Fed Chairman Ben S. Bernanke at a Senate hearing last year.

Bipartisan frustration with the Fed has been boiling for years, but there were limits Tuesday to how far lawmakers were willing to go. Minutes after approving the one-time audit, senators defeated another plan for ongoing audit authority that would include monetary policy.

The Obama administration and Senate Democratic leaders said broader audit power could compromise the Fed's independence.

Also Tuesday, senators rejected Republicans' efforts to force reforms for Fannie Mae and Freddie Mac, the government-backed mortgage companies that many analysts say helped spark the financial blowup by backing ill-advised loans.

Democratic leaders said they want to reform the two government-sponsored enterprises later, when they can give it more consideration, rather than tuck the Republicans' proposal into the major financial reform package senators are pushing to complete.

Excerpt: Read More at Washington Times