Perhaps no other force had as much to do with stabilizing the financial system during the crisis as the Federal Reserve. And no other influence is shrouded in so much mystery. Although its tactics were hugely successful, the Fed has become incredibly controversial due to its secrecy. It has some politicians on both sides of the aisle calling for an audit to enhance transparency. But the Senate amendment -- sponsored by Sen. Bernard Sanders (I-VT) -- changed significantly on Thursday and lost much of its bite.

The House version of reform contains an amendment (.pdf) to audit the Fed sponsored by Rep. Ron Paul (R-TX). Indeed, in Sanders' original version (.pdf), he virtually copied Paul's amendment word-for-word, and added a section about better publicizing the details of Fed activity. Initially, both would have allowed periodic audits of all of the Fed's policy actions. They each would have also permitted the Government Accountability Office to determine what scopes the audits would encompass.

No more. In order to appeal to a broader audience, the revised Senate amendment (.pdf) has been watered down significantly. Now, the action would be reduced to a one-time audit, specifically targeted at the Fed's new programs created during the financial crisis. It also specifies the scope of work that the GAO should consider.

Paul is not amused. He released a statement yesterday condemning the changes. In it he says:

The Sanders Amendment now contains softer compromise language that exempts monetary policy decisions, discount window operations, and agreements with foreign central banks from Government Accounting Office ("GAO") audit.

Anyone who hoped for greater ongoing transparency to the Fed's activities will be very disappointed with the new Sanders version.

At this point, sources indicate that the new Sanders amendment will pass easily next week. After all, the changes were made to get more votes. It's no longer particularly controversial.

When the broader financial reform bill eventually passes the two Fed amendments will have to be reconciled. It's likely that the Sanders language will stick, however. Since the Senate needed a weaker amendment, it won't likely suddenly accept Paul's version, as that's what Sander's original proposal was based on. The Paul amendment passed the House Financial Services Committee easily and had over 319 co-sponsors.