In opening statements Barney Frank discuses history of interactions with the federal reserve over the years about openness.  And the path Congress has taken to get to where it is today and why many before them also thought it was important to do so.

Rep. Frank went on to talk about how systematically Ron Paul was kept out of being chair of a sub committee, The Domestic Monetary policy sub committee, that Paul was ranking member of.  That committee would have had the ability to get this bill through years earlier.  This committee was merged with The International monetary policy sub committee and up until he was once again ranking member when the committee just vanished.  It was an eye opening history lesson of how this bill was stopped in the past.

Rep. Frank mentions a few of the worries of an audit and offers some possible solutions to those concerns.  One is that the transparency and audits should be delayed so not to effect trading with or against the fed.  Frank mentions multiple times he believes there should be a time delay in release of the information and activities discovered through audits.   A delay should avoid conflicts of interest or trading against the fed. Also he mentions the feds argument that it would involve monetary policy.  He directly says the bill will not effect monetary policy. However Rep. Frank believes it is a democratic principle for elected officials to speak up about monetary policy.  Even though Barney Frank believes this, he and Ron Paul have discussed this issue multiple times, and agree the intent of the audit is not to effect monetary policy.  Paul states that the way the bill is written he doesn’t “believe we could, or we should, effect monetary policy.”

Ron Paul begins his questioning in typical fashion by making a rhetorical point rather than asking questions. One statement he makes is the argument that the monetary policy of the fed is already politicized and decisions are made to appease those in power.  So the argument that the bill would politicize monetary policy is a mute point since it is politicized now.  He explains that when the fed talks about independence they really mean secrecy. So if we substitute secrecy for independence each time the fed says independence, then we might have a better idea of what we are talking about.  Paul goes on to argue that the GAO (Government Accounting Office)is an independent agency and asks, “How many audits does the GAO perform in all agencies each year… nobody has ever charge the GAO with altering policies.”

Rep. Ron Paul ends his opening comments by explaining how the American people were awakened by the recent financial crisis and bank bailouts.  Now the people want answers to the questions of where the money is coming from and to whom is it going?  Since the fed has refused in previous appearances before congress to disclose this information, congress will hopefully fix it so they have to tell them.  The people have realized that their elected officials in Congress not only have a right to the answers to these questions, they also have an obligation to demand the answers and audit the federal reserve.

Rep. Mel Watt of North Carolina stated “The question is not whether their will be some kind of increased audit of the federal reserve, but how that will take place.”  He argues for why the bill should be apart of regulatory reform, not necessarily a separate bill,  because the roll of the fed will be unclear until regulatory reform is done.  At that point the audit conditions should be consistent with its authority it will have, not the power it has now.  He makes it a point to mention that even thought this is his position currently, it is not a strong position.  If regulatory change is coming soon, best to make sure the audit will cover any new powers ill gotten by the fed.

Support on the bill is overwhelming from both sides of the aisles.  All opening remarks spoke of looking for the transparency the bill will bring. They all thanked Rep. Paul for bringing this bill and spoke very highly of him. Rep. Watts thanks Paul for being an articulate,  determined and longstanding advocate of this position and he Believes Paul will get some great results out of his efforts.

Many Representatives mentioned in their opening statements the calls they were receiving in their offices about support for the bill from their local constituents.  With the state of the current economy it is easy to understand why the secrecy of the fed is not being looked upon favorably by the American people.  When Ben Bernanke told Congress recently that he did not have to tell them who got the trillions of dollars of our money in bail out funds it awoken a sleeping beast in Congress.  Not often does Congress come together across party lines to do some thing that is so simple and so right,  it is a nice thing to see in Washington.

Scott Alvarez, General Counsel to the Board of Governors of the Federal Reserve was the first to testify before the committee.  He  tries to present a picture of an open federal reserve that freely discloses information.  If the federal reserve’s openness was a real picture, it would be so out of focus you would not be sure if it was a teddy bear or a grizzly bear.  The problem is, there are very few things the fed does that it cannot be audited over and are not public, and these few things are their most important duties.  A few of these practices, such as making deals with foreign governments and foreign central banks, are what this bill aims to audit.  He argues that the bill would subject the fed to monetary policy audits by the GAO.  He was clearly asleep or absent for the first 15 minutes, it was made very clear that monetary policy was not an objective of the bill.  Mostly  he spewed propaganda dealing with the red herring of the monetary policy line.   He signaled the possibility of the fed being more open with Congress  if they can assure the fed that Congress will not interfere or second guess monetary policy.  At one point it sounds like if the GAO can stay out of it, they might be able to work something out.  Maybe a report directly to this sub committee or another government entity that could have oversight without having to make everything public.

Rep. Alan Grayson of Florida. grilled the General Counsel of the fed harder than all the rest put together.  It was impressive. If Ron Paul has not invited him to dinner, he needs to and get some pointers on the best use of his 2-5 minutes to get the point across through questioning.  Looks like he is Rep. Paul’s best ally.  Rep. Grayson grilled him right off the bat. He asked if the fed had the legal authority to manipulate the stock market or the futures market. He answered they don’t try to influence the market at which point Grayson interrupted and responded sarcastically “try… do they?”   Next he asked if they had all the gold they claimed and if he we object to a GAO audit of the gold, the lawyer said he would see no problem with that. “Good” Grayson responded, realizing that he doesn’t fully know what he just agreed to.  Then he goes on asking who made the trades on behalf of the federal reserve.  The lawyer for the fed answers that they have what they call primary dealers that do the trades.  He asked who were the ones actually executing the trades for the federal reserve.  He said the N.Y. fed.  He responded “answer the questions…do you have people sitting at screens at the NY fed actually making trades?” His response was that the fed used primary dealers to execute the trades, ah ha!  Grayson asked for a name, he named one.  JP Morgan Chase.  Why is a private bank making trades on behalf of the Fed?   He ended his passionate line of direct questioning with “we really need answers to these question, and the only way to get the answers to these questions is to have the GAO audit the federal reserve!” Watch it!

The Bill currently has 295 co sponsors, and Paul says 75% of the American public support an audit of the federal reserve.

Oh yeah and did you know the federal reserve is no more federal than Fed-Ex? Our Country’s central bank is a private bank.  Look it up, try to find out who actually owns it.  The banker elite tricked us and won.  This could be our second chance.  Good luck Ron Paul!