Taibbi’s View of Congress’ Audit the Fed Debate

Matt Taibbi’s latest piece in Rolling Stone is about how Wall Street’s “flooded the Capitol with more than 2,000 paid lobbyists” to fight the Restoring American Financial Stability Act — which even veteran Congress members seem to recognize as a new level for the “intensity of the blitz.”

Lobbying on behalf the regular folk are the Americans for Financial Reform, which Taibbi describes as a barely year-old organization made up of 60 unpaid volunteers. He divides this war between lobbyists into four fronts: auditing the Fed, protecting consumers, ending “too big to fail,” and reining in derivatives.

Here is Taibbi’s look at front one, auditing the Fed:

“…For nearly a century, the Federal Reserve has been, within our borders, a nation unto itself – with vast powers to shape the economy and no real limits to its authority beyond the president’s ability to appoint its chairman. In the bubble era it has been transformed into a kind of automatic bailout mechanism, helping Wall Street drink itself sober by flooding big banks with cheap money after the collapse of each speculative boom.

“But suddenly, with both the Huffington Post crowd and the Tea Party raising their pitchforks in outrage, [Vermont Sen. Bernie] Sanders managed to pass – by a vote of 96-0 – an amendment to force the Fed to open its books to congressional scrutiny.

“If Alan Greenspan and Ben Bernanke don’t take that 96-0 vote as a kick-to-the-groin testament to the staggering unpopularity of the Fed, they should. When 96 senators agree on something, they’re usually affirming their devotion to the flag or commemorating the death of Mother Teresa. But as it turns out, the more than $2 trillion in loans that the Fed handed out in secret after the 2008 meltdown is something that both the left and the right have no problem banding together to piss on.

“One of the most bizarre alliances of the bailout era took place when Sanders, a democratic socialist, and Sen. Jim DeMint, a hardcore conservative from South Carolina, went on the CNBC show hosted by crazy supply-sider Larry Kudlow – and all three found themselves in complete agreement on the need to force Fed loans into the open. “People who come from very different places agree that it ought not to be done in secret, that the Fed isn’t Skull and Bones,” says Michael Briggs, an aide to Sanders.

“The Sanders amendment, if it survives in conference, will lead to some delicious disclosures. Almost exactly a year ago, Sanders questioned Bernanke at a Senate-budget hearing, asking him to name the banks that had been bailed out by the Fed. “Will you tell the American people to whom you lent 2.2 trillion of their dollars?” Sanders demanded. After a little hemming and hawing, a bored-looking Bernanke – Time magazine’s 2009 Person of the Year, by the way – bluntly said, “No.” It would be “counterproductive,” he explained, if clients and investors learned that these poor banks were broke enough to need a public handout.

“Bernanke’s performance that day so rankled Sanders that he wrote up his amendment specifically to bring the Fed’s goblin-in-chief to heel.”

Taibbi also briefly mentions the Fed audit version put forward by “libertarian hero” Ron Paul to permanently open the Fed’s activity to Congressional scrutiny. However, he explains Obama was against that version from the beginning because it could open the Fed up to too much day-to-day involvement from Congress. Instead the amendment has ended up a “one-time shot” where Congress can only look at the Fed loans from after December 2007 once, and afterward the books will be again closed forever.

You can read the entire article on Rolling Stone, which covers Wall Street’s war in Congress.


Rocky Vega,
The Daily Reckoning

The Daily Reckoning