This morning I had a query from someone asking me to share my thoughts about the Federal Reserve Transparency Act, better known as the bill to “Audit the Fed.” Having given him a brief answer, I thought I might say a little more here.
Although Rand Paul promises that his measure will shed much-needed light on the Fed’s undertakings (the Senate version of his measure was even called “The Federal Reserve Sunshine Act”), the truth is that it’s unlikely to reveal any new facts of importance beyond what existing Fed audits–including those provided by Title XI of the Dodd-Frank Act (which provides for a GAO audit of the Fed’s crisis-related emergency lending)–can themselves reveal.
True, unlike existing measures Paul’s bill would also let the GAO “audit” the Fed’s conduct of monetary policy, including its open-market operations and financial dealings with other central banks. But if “sunshine” is the first word that pops into your head when contemplating this possibility, you probably have had a little too much of it already. Certainly you have not read many GAO reports.
Don’t get me wrong: the GAO does its job’s well, and a report by it on the Fed’s conduct of monetary policy would probably be a much better read than most academic papers on the same topic. But if you’re looking forward to seeing the GAO give the FOMC a good thrashing, or to any other sort of scintillating reading, you’re barking up the wrong tree, because what you’re likely to be in for instead is a bunch of charts and tables, accompanied by a competent but very measured and detached review of the Fed’s activities, of the sort that might prove very handy for assessing the Fed’s performance, but that is hardly likely to be the least-bit earth-shattering.
But if some dry-as-dust report is all we’re talking about, why are Fed officials so up in arms about the proposal? That’s a good question. Fed officials themselves claim that Paul’s measure would give Congress the power to “harass” the Fed, thereby allowing it (in Dallas Fed President Richard Fisher’s words) “to bend monetary policy to the will of politicians.” But as my colleague Mark Calabria explains, the measure wouldn’t allow anything of the sort. Evidently these Fed officials were too busy arranging the Fed’s wagons in a big circle to take time to actually read the measure they were so anxious to defend their institution against. Had they bothered they might have noticed that the it calls for the GAO, and not “Congress” (or any body of “politicians”) to report on the Fed’s policies. They might even have taken a moment to recall that the GAO is an independent agency–just like the Fed’s own Board of Governors–whose head, the Comptroller General of the U.S., is a non-partisan professional appointed by the President–rather like their own Chairman. Finally, they might have chewed a little on the GAO’s own description of its mission, which is “to support the Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the benefit of the American people.”
In short, what we have here is one independent agency of the U.S. government insisting on its right to be uniquely exempt from review by another independent agency charged with making sure that Congress and its departments and agencies perform their Constitutional duties successfully and efficiently. That’s not fighting to preserve independence. It’s fighting to avoid accountability.
Come to think of it, perhaps Paul’s proposal will reveal some deep, dark Fed secret after all. Perhaps it already has.