The Federal Reserve, as William Greider has written, thrives on secrecy, making it the perfect tool for the banking and finance industry to gin up profits. Whatever its earliest mission, it now functions as nothing more than the bankers’ private government support system.
The veil, however, could be lifted if legislation that has garnered wide, bipartisan support can get through Congress with enough support — both from members of the two houses and from the public at large — to force the president to sign it.
The legislation, as described by Ryan Grim on The Huffington Post, is pretty straightforward.
The measure, cosponsored by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.), authorizes the Government Accountability Office to conduct a wide-ranging audit of the Fed’s opaque deals with foreign central banks and major U.S. financial institutions. The Fed has never had a real audit in its history and little is known of what it does with the trillions of dollars at its disposal.
Critics of the bill say it will compromise the Fed’s independence, opening it up to political manipulation. The problem with the argument, however, is that the Fed already is subject to political influence — but from the banking industry, without any say from the government or the people it is supposed to represent.
That was the gist of a letter from a coalition of labor, left-leaning economists and other progressives seeking to democratize the Web, as reported by The Huffington Post earlier in the week.
The letter notes that during the financial crisis of the past two years, the Fed’s role has shifted from simply setting monetary policy via interest rates to rapidly acquiring “a wide variety of private assets and extend[ing] massive secret bailouts to major financial institutions.”
Among those bailouts, critics argue, was the Fed’s funneling of cash to AIG counterparties. Earlier this week, a government watchdog issued a blistering report that blamed the Federal Reserve for withholding details of its massive rescue of AIG last fall. In particular, the report blamed the Federal Reserve for paying for botching its private negotiations regarding the price AIG’s rapidly souring derivatives investments, a secret move that cost taxpayers at least $13 billion.
The issue has created what to Washington’s eyes might seem like strange bed fellows — libertarian rightwinger Ron Paul and lefties like Alan Grayson and Dennis Kucinich — but that’s only because the Washington establishment cannot see beyond the D-R paradigm. The Fed question must be viewed from a different vantage point, one that arranges the political world along the question of economic democracy.
Paul and Grayson may have different views, ultimately, of how the economy should function, but they both are concerned about the outsized and still-growing influence of the financial industry on the economy and our democracy.
This legislation is not perfect, either, but it is necessary. The fact that people like Timothy Geithner and Lawrence Summers oppose it should be enough to make us realize just how much.
Hank Kalet 