House Nails Fed with an Audit

Will the move bring needed transparency or financial instability?

In a move vociferously opposed by Treasury Secretary Tim Geithner and Fed Chief Ben Bernanke, a congressional panel has approved legislation requiring government audits of the Federal Reserve. The initiative is the brainchild of Texas Congressman Ron Paul, who corralled the bipartisan support of 309 representatives in the House. If passed in a final vote on December 1, it will be the first government audit of the central bank's 95-year-history. Here's who stands to win and who stands to lose:

WINNERS

• Ron Paul, writes a blogger at The Crossed Pond: "By any reckoning, an enormous success for Paul, wherein his not-mainstream view of the Fed nevertheless finds expression in a timely, common sense bill focused on accountability. This is exactly how you hope a guy like Paul winds up operating. Using his seat to launch broad swipes at the ideological underpinnings of everything, but also, occasionally, expressing that in good legislation that seems obvious but never would have come from anybody but him."

• "An Unusual Coalition," notes Arthur Delaney at The Huffington Post. Amazed by the diversity of personalities who successfully pushed the amendment through, Delaney ticks off a list including progressive economists Dean Baker and Rob Johnson; author Naomi Klein; the AFL-CIO's Richard Trumka; and of course, the staunch libertarian Ron Paul.
  

• The American People, writes John Nichols at The Nation: "This is about simple transparency, which everyone should favor... The amendment... would remove blanket restrictions on General Accounting Office audits of the Fed [and] allow auditing of every item on the Fed's balance sheet, including all credit facilities and all securities purchase programs."

LOSERS

• Beltway Elites, writes Glenn Greenwald at Salon: "The Fed is a typical Washington institution that operates un-democratically and in virtually total secrecy, and a Congressionally-mandated audit that they (and much of the DC establishment) desperately oppose would be a serious step towards changing the dynamic of how things function. At the very least, it would provide an important template for defeating the interests which, in Washington, almost never lose. At least yesterday, those interests did lose -- resoundingly -- and the importance of that should not be overlooked."

• The Obama Administration, writes Ezra Klein: "The public wants someone to lose a pound of flesh over what happened to the economy, and since Tim Geithner didn't take it from the banks, some in Congress want to take it from Geithner... That's bad news for the administration. Vulnerable legislators need to punish someone, and if the banks aren't available, the government institutions that protected them may be the next best thing."

• America's Financial Stability, writes Peter Cohan at Daily Finance: "It's a really bad idea, because the Fed needs to be independent of political interference in order to act in what it sees as the best interests of the U.S. economy and financial system. Auditing the Fed will provide its opponents in Congress with an ongoing mechanism to meddle with its operations. And from what I have seen of Congressional inquiries into the financial meltdown, the members of Congress have much better insight into what it takes to win elections than into how to govern the U.S. financial system."