Alan Grayson Discloses That Dodd Bill Covertly Eliminates Already Passed Legislation Requiring Full Fed Audit
Once again we get confirmation that Chris Dodd is nothing but a paid manservant for his Federal Reserve masters, in addition to being a lame duck, whose last days in office are meant to do everything to allow the old-school Wall Street ways of endless secrecy and Fed bailouts to continue in perpetuity. As Ryan Grim points out "Alan Grayson and co-author Rep. Ron Paul passed legislation through the House that would allow the Government Accountability Office (GAO) to audit the Federal Reserve and, after a delay, release the information to Congress. It was a remarkable victory, with a populist coalition beating back the combined lobbying efforts of the Treasury Department, the Fed and Wall Street banks. The Senate has been more hostile territory for the Fed audit provision. Banking Committee Chairman Chris Dodd (D-Conn.) opposes the Grayson-Paul version, but allowed a much more restrictive audit proposal from Sen. Jeff Merkley (D-Oregon) into his bill." Why and how Dodd believes he can stand against this critical issue, that over 80% of America supports by demanding Fed transparency, is beyond any rational attempts at explanation. How he hopes to get away with it is even more mindboggling.
From the Huffington Post:
The Wall Street reform bill headed for a test vote on the Senate floor Monday night will allow the Federal Reserve to continue to pump trillions of dollars into major banks largely in secrecy, the co-author of House language that would open the central bank to an audit charged in a memo to the Senate.
"The Senate has a provision in its reform bill that purports to audit the Fed. But, it really doesn't do anything of the sort. I'm going to run down the details for you, and reprint the legislative language so you can read it yourself," writes Rep. Alan Grayson (D-Fla.).
Grayson's summary of the bill's shortcomings, presented below, indicate that the "Seante bill would allow an audit of the TALF program and slightly expands authority to audit emergency lending conducted under section 13(3) of the Federal Reserve Act, but restricts it to very specific purposes. Meanwhile, it would not allow the GAO to look into the Fed's massive purchase of toxic assets, its hundreds of billions in foreign currency swaps with other central banks or its open market operations, among other restrictions."
Jeff Merkley, whose language was used instead of the passed Grayson-Paul version, has this to say:
"I appreciate Representative Grayson's concerns over accountability at the Federal Reserve. I have been a strong proponent of Fed reform and voted against the re-confirmation of Ben Bernanke because the Fed has been so lax in using its regulatory powers. Moreover, I felt strongly that we need to act now to empower the GAO to audit the extraordinary emergency programs created by the Fed and I succeeded in getting that power into the Senate bill. Rep. Grayson points out, fairly in my mind, that we need to go even further to audit the Fed's standing programs. I agree. While we need to protect the Fed's independence to implement monetary policy, I think the structure and use of their standard programs should be transparent."
There can be no compromise on this issue. Congress and America have spoken. If Dodd believes he can usurp the democratic process in this most critical of issues, which allows the entity in charge of money printing with practically the same liberties as it had when it bailed out in full secrecy every bank in the US and threw countless generations of working-class Americans in a debt-induced coma, it is one thing. If he manages to get away with, it either shows that the degree of apathy demonstrated by US citizens is indicative that nothing can save this country, or that any pretense of democracy in America has been trampled in our accelerating conversion to an autocratic state.
Grayson's memo which confirms just how useless Dodd's "Fed audit" provisions are:
Memo to the Senate: Stop Secret Bailouts by the Fed
Sometimes, you just know that you've struck a nerve. I knew it early
last year, when a clip of my questioning the Inspector General of the
Federal Reserve over the Fed's balance sheet became the most viewed Congressional hearing
in YouTube history. The Fed had lent out around $1 trillion, and I
wanted to know what happened to the people's money. So did the people.
They were angry at the Fed, and they showed it. And because of that
righteous anger, the financial reform bill in the House contains a
provision to audit the Federal Reserve fully. If it passes the Senate,
we will finally know to whom the Fed lent our money, how much, and what
little we got in return.
So it's up to the Senate. The Senate has a provision in its reform
bill that purports to audit the Fed. But, it really doesn't do anything
of the sort. I'm going to run down the details for you, and reprint the
legislative language so you can read it yourself. But the story is
simple; if the House version of a Fed audit passes, we will finally
know to whom the Fed lent our money. If the Senate version passes, the
Fed can continue to make sweetheart loans to whomever it wants, without
telling Congress or the public.
The way Congress oversees complicated government agencies is through
the Congressional audit arm, the Government Accountability Office
(GAO). The GAO does the actual auditing, and gives that information to
Congress, which then holds hearings and makes policy. The House bill
grants the GAO the authority to audit the Fed, and then releases that
information to Congress with a six-month delay, to prevent traders from
gaming the system.
The Senate version only allows the GAO to audit a certain part of
the Federal Reserve, its emergency lending facilities. The GAO already
has some of that authority. Amazingly, the Senate version forces the
GAO to withhold this information from the public, and Congress, for as
long as the Federal Reserve chooses.
The details, and the specific legislative language, are below.
Limited Audit Authority
What the Senate bill allows:
- The Senate language slightly expands existing authority to the GAO to
audit only the emergency lending authority in section 13(3) of the
Federal Reserve Act, but only for specific purposes.
- The Senate language would grant the GAO authority to audit the TALF program.
What the bill does NOT allow:
- The Senate language does not allow audits of the mortgage backed
security purchase program, a $1.25 trillion program that at this point
comprises the bulk of the Fed's balance sheet. This program includes
Freddie and Fannie backed debt.
- The Senate language does not allow audits of possible losses on
foreign currency swap lines, of which there were more than $500 billion
at the height of the crisis. This includes unlimited credit lines
granted to central banks all over the world, solely through at the
discretion of Federal Reserve and without the input of any elected
official or the State Department.
- The Senate language does not allow audits of open market operations,
where there is ample room for errors, market manipulation, and insider
- The Senate language does not allow audits of possible losses on
securities acquired through non-section 13(3) facilities. This includes
looking for possible losses, seigniorage, political conflicts and costs
to the Treasury.
Federal Reserve Secrecy
- In the Senate version, all audits must remain redacted. The GAO can't
even tell Congress to whom the Fed is lending money, the amounts it is
lending, or any details about collateral or assets held in connection
with any credit facility.
- The GAO can never release a full version of any audit unless the
Federal Reserve first chooses to shut down the audited credit facility.
- Once the Federal Reserve shuts down the authority for the credit
facility, the GAO still has to wait a year before it can release
details about that facility. If the Fed simply chooses to stop making
loans, but does not eliminate the authority to make loans, the GAO has
to wait three years before it can release a full report. The Fed can at
any point during this period choose to restart the facility, and
thereby prevent the release of a full report.
See for yourself. The legislative language in the Senate draft is here.
Sec. 714. Audit of Financial Institutions Examination Council,
Federal Reserve Board, Federal Reserve banks, Federal Deposit Insurance Corporation, and Office of Comptroller of the Currency
(a) In this section, "agency" means the Financial Institutions
Examination Council, the Board of Governors of the Federal Reserve
System (in this section referred to as the `Board'), Federal Reserve
Banks, the Federal Deposit Insurance Corporation, the Office of the
Comptroller of the Currency, and the Office of Thrift Supervision.
(b) Under regulations of the Comptroller General, the Comptroller
General shall audit an agency, but may carry out an onsite examination
of an open insured bank or bank holding company only if the appropriate
agency has consented in writing. Audits of the Board and Federal
reserve banks may not include -
(1) transactions for or with a foreign central bank, government of a
foreign country, or non-private international financing organization;
(2) deliberations, decisions, or actions on monetary policy matters,
including discount window operations, reserves of member banks,
securities credit, interest on deposits, and open market operations;
(3) transactions made under the direction of the Federal Open Market Committee; or
(4) a part of a discussion or communication among or between members of
the Board and officers and employees of the Federal Reserve System
related to clauses (1)-(3) of this subsection.
(c)(1) Except as provided in this subsection, an officer or employee of
the Government Accountability Office may not disclose information
identifying an open bank, an open bank holding company, or a customer
of an open or closed bank or bank holding company. The Comptroller
General may disclose information related to the affairs of a closed
bank or closed bank holding company identifying a customer of the
closed bank or closed bank holding company only if the Comptroller
General believes the customer had a controlling influence in the
management of the closed bank or closed bank holding company or was
related to or affiliated with a person or group having a controlling
(2) An officer or employee of the Office may discuss a customer, bank,
or bank holding company with an official of an agency and may report an
apparent criminal violation to an appropriate law enforcement authority
of the United States Government or a State.
(3) Except as provided under paragraph (4), an officer or employee of
the Government Accountability Office may not disclose to any person
outside the Government Accountability Office information obtained in
audits or examinations conducted under subsection (e) and maintained as
confidential by the Board or the Federal Reserve banks.
(4) This subsection shall not--
(A) authorize an officer or employee of an agency to withhold
information from any committee or subcommittee of jurisdiction of
Congress, or any member of such committee or subcommittee; or
(B) limit any disclosure by the Government Accountability Office to any
committee or subcommittee of jurisdiction of Congress, or any member of
such committee or subcommittee.
(d)(1) To carry out this section, all records and property of or used
by an agency, including samples of reports of examinations of a bank or
bank holding company the Comptroller General considers statistically
meaningful and workpapers and correspondence related to the reports
shall be made available to the Comptroller General. The Comptroller
General shall have access to the officers, employees, contractors, and
other agents and representatives of an agency and any entity
established by an agency at any reasonable time as the Comptroller
General may request. The Comptroller General may make and retain copies
of such books, accounts, and other records as the Comptroller General
determines appropriate. The Comptroller General shall give an agency a
current list of officers and employees to whom, with proper
identification, records and property may be made available, and who may
make notes or copies necessary to carry out an audit.
(2) The Comptroller General shall prevent unauthorized access to
Records, copies of any Record, or property of or used by an agency that
the Comptroller General obtains during an audit.
(3)(A) For purposes of conducting audits and examinations under
subsection (e), the Comptroller General shall have access, upon
request, to any information, data, schedules, books, accounts,
financial records, reports, files, electronic communications, or other
papers, things or property belonging to or in use by--
"(i) any entity established by any action taken by the Board described under subsection (e);
"(ii) any entity receiving assistance from any action taken by the
Board described under subsection (e), to the extent that the access and
request relates to that assistance; and
(iii) the officers, directors, employees, independent public
accountants, financial advisors and any and all representatives of any
entity described under clause (i) or (ii); to the extent that the
access and request relates to that assistance;
(B) The Comptroller General shall have access as provided under
subparagraph (A) at such time as the Comptroller General may request.
(C) Each contract, term sheet, or other agreement between the Board or
any Federal reserve bank (or any entity established by the Board or any
Federal reserve bank) and an entity receiving assistance from any
action taken by the Board described under subsection (e) shall provide
for access by the Comptroller General in accordance with this paragraph.
(e) Notwithstanding subsection (b), the Comptroller General may
conduct audits, including onsite examinations when the Comptroller
General determines such audits and examinations are appropriate, of any
action taken by the Board under the third undesignated paragraph of
section 13 of the Federal Reserve Act (12 U.S.C. 343); with respect to
a single and specific partnership or corporation.'
(f) REVIEWS OF CREDIT FACILITIES OF THE FEDERAL RESERVE SYSTEM.--
(1) DEFINITION.--In this subsection, the term 'credit facility' means
any utility, facility, or program authorized by the Board of Governors
of the Federal Reserve System under the third undesignated paragraph of
section 13 of the Federal Reserve Act (12 U.S.C. 343), including any
special purpose vehicle or other entity established by or on behalf of
the Board of Governors or a Federal reserve bank, that is not subject
to audit under subsection (e), including--
(A) the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility;
(B) the Term Asset-Backed Securities Loan Facility;
(C) the Primary Dealer Credit Facility;
(D) the Commercial Paper Funding Facility; and
(E) the Term Securities Lending Facility.
(2) AUTHORITY FOR REVIEWS AND EXAMINATIONS.--Subject to paragraph (3),
and notwithstanding any limitation in subsection (b) on the auditing
and oversight of certain functions of the Board of Governors of the
Federal Reserve System or any Federal reserve bank, the Comptroller
General of the United States may conduct reviews, including onsite
examinations, of the Board of Governors, a Federal reserve bank, or a
credit facility, if the Comptroller General determines that such
reviews are appropriate, solely for the purposes of assessing, with
respect to a credit facility--
(A) the operational integrity, accounting, financial reporting, and internal controls of the credit facility;
(B) the effectiveness of the collateral policies established for the
facility in mitigating risk to the relevant Federal reserve bank and
(C) whether the credit facility inappropriately favors one or more
specific participants over other institutions eligible to utilize the
(D) the policies governing the use, selection, or payment of third-party contractors by or for any credit facility.
(3) REPORTS AND DELAYED DISCLOSURE.--
(A) REPORTS REQUIRED.--A report on each review conducted under
paragraph shall be submitted by the Comptroller General to the Congress
before the end of the 90-day period beginning on the date on which such
review is completed.
(B) CONTENTS.--The report under subparagraph (A) shall include a
detailed description of the findings and conclusions of the Comptroller
General with respect to the matters described in paragraph (2) that
were reviewed and are the subject of the report, together with such
recommendations for legislative or administrative action relating to
such matters as the Comptroller General may determine to be appropriate.
(C) DELAYED RELEASE OF CERTAIN INFORMATION.--
(i) IN GENERAL.--The Comptroller General shall not disclose to any
person or entity, including to Congress, the names or identifying
details of specific participants in any credit facility, the amounts
borrowed by specific participants in any credit facility, or
identifying details regarding assets or collateral held by, under, or
in connection with any credit facility, and any report provided under
subparagraph (A) shall be redacted to ensure that such names and
details are not disclosed.
(ii) DELAYED RELEASE.--The non-disclosure obligation under clause (i)
shall expire with respect to any participant on the date on which the
Board of Governors, directly or through a Federal reserve bank,
publicly discloses the identity of the subject participant or the
identifying details of the subject assets or collateral.
(iii) GENERAL RELEASE.--The Comptroller General shall release a non
redacted version of any report on a credit facility 1 year after the
effective date of the termination by the Board of Governors of the
authorization for the credit facility. For purposes of this clause, a
credit facility shall be deemed to have terminated 24 months after the
date on which the credit facility ceases to make extensions of credit
and loans, unless the credit facility is otherwise terminated by the
Board of Governors.
(iv) EXCEPTIONS.--The nondisclosure obligation under clause (i) shall
not apply to the credit facilities Maiden Lane, Maiden Lane II, and
Maiden Lane III.
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