The Federal Reserve is privately lobbying against a bipartisan Senate
amendment that would open the central bank to an audit by the
Government Accountability Office, according to documents distributed to
Senate offices by a Fed official.
The effort to beat back the audit relies on playing two members of
the same caucus -- Sens. Bernie Sanders (I-Vt.) and Jeff Merkley
(D-Ore.) -- off each other.
In order to obtain the documents, HuffPost agreed not to reveal the
name of the Federal Reserve official who did the specific lobbying in
question. Fed officials, including Chairman Ben Bernanke, have made
public statements against requiring disclosure and members of the Senate
and their aides have talked about Fed lobbying in general, but the
documents reveal a very specific hand-to-hand style of combat being
engaged in as the vote on the amendment draws near.
With a vote possible on Tuesday, a Fed official e-mailed three
documents to a Senate staffer. "I am sending some information on the
effects of audits of the Federal Reserve System as well as two
additional documents - one summarizes the GAO and related provisions in
the Dodd Bill as passed by the committee (Title XI, Sections 1151-1153)
and the other is a summary of the Sanders and Paul/Grayson amendments,"
the official said in an e-mail.
"As I mentioned, we believe that the bipartisan Corker-Merkley
provision in the Dodd Bill is quite strong and addresses issues of
transparency and disclosure without impinging on the independence of
monetary policy," the official goes on.
Merkley teamed with Sen. Bob Corker (R-Tenn.) on an audit provision,
but Merkley himself says he'd prefer to go further. "I appreciate
Representative [Alan] 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," Merkley said in a statement to
HuffPost, responding to an analysis from Rep. Alan Grayson (D-Fla.)
showing that the Senate bill did not meaningfully expand transparency.
"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."
The Fed argument is a replay of a tactic that the bank tried in the
House. Instead of outright opposition, the Fed backed an amendment in
the lower chamber from Rep. Mel Watt (D-N.C.), which the bank said would
expand transparency but not interfere with monetary policy. It became
clear, however, that the amendment would not expand transparency and was
an attempt to defeat the audit in general. The Watt amendment was
The Corker-Merkley amendment is the Senate version of the Watt
amendment and the Fed is once again arguing that the broader amendment
will impinge on the independence of monetary policy.
"The Sanders amendment, however, would directly interfere with
monetary policy," argues the Fed official. "The amendment removes the
current statutory protection for core monetary policy activities from
GAO audit and would permit the GAO to audit monetary policy decisions
and the decisionmaking process itself."
Just as the argument lacked credibility in the House, so does it in
the Senate. The Sanders amendment specifically reads: "Nothing in this
[amendment] shall be construed as interference in or dictation of
monetary policy to the Federal Reserve System by the Congress or the
Government Accountability Office."
It further reads: "Audits of the Federal Reserve Board and Federal
reserve banks shall not include unreleased transcripts or minutes of
meetings of the Board of Governors or of the Federal Open Market
In one Fed document, the Fed argues that such a prohibition is
insufficient because "nothing prohibits the GAO from auditing the
underlying decisions and discussions at those meetings."
The Fed does not explain, however, how the GAO could possibly "audit the
underlying decisions and discussions" without including the transcripts
Rather, the Fed argues that an audit could "cast a chill on monetary
policy deliberations through another channel. If policymakers believed
that GAO audits would result in published analyses of their policy
discussions, they might be less willing to engage in the unfettered and
wide-ranging debates that are essential to identifying the best possible
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Moreover, the publication of the results of GAO audits related to
monetary policy actions and deliberations could complicate and interfere
with the communication of the FOMC's intentions regarding monetary
policy to financial markets and the public more broadly. Households,
firms, and financial market participants might be uncertain about the
implications of the GAO's findings for future decisions of the FOMC,
thereby increasing market volatility and weakening the ability of
monetary policy actions to achieve their desired effects."
The intent of the Senate audit amendment, according to its backers,
is to uncover what financial institutions have been on the receiving end
of public money -- and how much. The Fed argues that revealing such
information would make financial institutions less willing to accept Fed
money -- an argument the amendment's backers find unpersuasive.
In arguing that the Fed should be trusted, rather than audited, the
Fed ironically misstates what the Sanders amendment would do in making
"Interestingly, and perhaps unintentionally, the Sanders Amendment
also strikes the amendments that the Dodd bill makes to our 13(3)
authority, which would limit 13(3) lending to broad-based facilities
going forward and require Treasury consent for 13(3) lending," reads one
document from the Fed.
Rather, the Sanders amendment leaves the language in place, but
removes the Fed's ability to keep such lending secret.
The Fed also argues that legislation passed in 2009 already gives
"the GAO new authority to conduct audits of the credit facilities
extended by the Federal Reserve to 'single and specific' companies under
the authority provided by section 13(3) of the Federal Reserve Act,
including the loan facilities provided to, or created for, American
International Group and Bear Stearns."
The "single and specific" concession was granted in hand-writing on the Senate floor -- and
despite the law, the Fed is fighting Bloomberg News in court,
arguing that it does not have to release that very information.
Last year, the Fed brought on Enron's former top lobbyist, Linda
Robertson, to help fend off the audit. "Robertson would help the Fed
manage relations with lawmakers seeking greater oversight of a central
bank that has used emergency powers to prevent Wall Street's demise," Bloomberg reported
Read the three Fed lobbying documents:
Sanders' amendment is here.