Embattled Fed Faces Historic Audits Under House Proposal

Ron PaulThe embattled Federal Reserve, the credit industry’s chief overseer, will have its bailout programs and monetary policies audited by Congress, under a measure approved today by a House panel.
The amendment passed by the House Financial Services Committee is part of a sweeping bill that would overhaul financial regulation and is designed to avert another severe financial crisis.
It would also give unprecedented glimpses into the Fed’s operations.
The Government Accountability Office, the investigative arm of Congress, would conduct the audits of all the Fed’s  operations, including emergency lending programs, bailouts of financial institutions, dealings with other central  banks and the Fed’s decision-making in setting interest rates.
The Fed is also the primary regulatory agencies that implements policies overseeing credit card issuers, and is currently drafting rules of the Credit CARD Act of 2009, the landmark reform laws set to take full effect in February.
The measure passed by the House committee today would require the GAO to complete the Fed audit within 12 months of passage of the larger oversight bill.
Proposed by Rep. Ron Paul, R-Texas, the amendment would eliminate a traditional exemption that shielded the Fed from Congressional audits of its monetary policy. For that reason, the Committee Chairman Barney Frank, D-Massachusetts, opposed the measure, contending that such a move would threaten the Fed’s political independence.
Obama Administration and Fed officials also opposed the proposal for the same reasons. Paul, a libertarian, has called for the abolishment of the Fed for several years.
In another vote, the House panel approved an amendment by Rep. Paul Kanjorski, D-Ohio, that sets standards to determine “systematic risk” of financial institutions that in the past would have been deemed “too big to fail.” The amendment also lists actions that a new oversight agency could impose on an institution of any size that may pose a  systemic risk. Those actions include imposing conditions on or terminating activities, limiting mergers and acquisitions, and in the most extreme cases, breaking up the company. 
The measure would, in effect, allow the dismantling of institutions whose outright collapse would threaten the U.S. economy or a single financial markets sector.
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