Democratic presidential candidate and U.S. Senator from Vermont Bernie Sanders wrote an op-ed for The New York Times on Wednesday calling for the Federal Reserve to be audited independently by the Government Accountability Office on an annual basis.
Meanwhile, Senate Majority Leader Mitch McConnell (R-Ky.) has scheduleda historic Jan. 12 vote on a bill, colloquially referred to as “Audit the Fed,” which was introduced by Sen. Rand Paul (R-Ky.). The bill would authorize the GAO to perform full audits of the Federal Reserve System.
“To rein in Wall Street, we should begin by reforming the Federal Reserve, which oversees financial institutions and which uses monetary policy to maintain price stability and full employment. Unfortunately, an institution that was created to serve all Americans has been hijacked by the very bankers it regulates,” wrote Sen. Sanders.
He added, “What went wrong at the Fed? The chief executives of some of the largest banks in America are allowed to serve on its boards. During the Wall Street crisis of 2007, Jamie Dimon, the chief executive and chairman of JPMorgan Chase, served on the New York Fed’s board of directors while his bank received more than $390 billion in financial assistance from the Fed. Next year, four of the 12 presidents at the regional Federal Reserve Banks will be former executives from one firm: Goldman Sachs.”
Sanders called for the Glass-Steagall Act to be reinstated, a Depression-era banking regulation that created a wall of separation between consumer and investment banks prior to its repeal by former President Bill Clinton. He also suggested that the Fed should be prevented from providing incentives to encourage banks to sit on cash reserves.
“As a condition of receiving financial assistance from the Fed,” said Sanders, “large banks must commit to increasing lending to creditworthy small businesses and consumers, reducing credit card interest rates and fees, and providing help to underwater and struggling homeowners.”
Sanders argued that the Federal Reserve suffers from a lack of transparency. “In 2010, I inserted an amendment in Dodd-Frank to audit the emergency lending by the Fed during the financial crisis. We need to go further and require the Government Accountability Office to conduct a full and independent audit of the Fed each and every year,” he said.
Audit the Fed legislation first became a hot political topic as a result of the sudden, meteoric 2008 rise to popularity of libertarian icon and former Congressman Ron Paul (R-Texas), who made the push for Fed transparency a central focus of his entire political career.
The Dodd-Frank amendment that Sen. Sanders is referring to that provided for a limited audit of the Federal Reserve drew strong criticism from Congressman Paul back in 2010, as Paul felt that Sanders had hijacked his momentum for a full audit and replaced it with a more limited, watered-down version. Congressman Paul’s full Audit the Fed legislation had already passed the House prior to Sanders’ push for a tamer audit in the Senate.
In the above-embedded video from 2010, an irate Ron Paul can be seen saying, “I had expected Bernie Sanders to offer S. 604 which is the same as H.R. 1207, which is Audit the Fed bill, and at the last minute he switched it and watered it down and, really, it adds nothing. It’s a possibility that it even makes the current conditions worse… We need to get as many messages as possible to any senator you can think of — especially to Bernie Sanders’ office — that we don’t want this version. We want a true audit of the Fed. We need to know what the Open Market Committee does and we need to know what they’re doing overseas with the agreements with central banks and financial institutions and other governments.”