Audit the Fed!

Congress and the President may do things we don't like, but at least we can tell them what we want, and sometimes even replace them on Election Day. Even unelected bureaucrats accept public comments on the regulations they create, and often change their policies as a result. Not so with the Federal Reserve Board (The Fed).

The Fed may have more influence on your life than any other part of the government, and yet it's completely independent of any corrective influence. Congress can't even be sure it really knows what the Fed is doing. That's why we believe . . .

No program to bring openness and accountability to government is complete without an audit of the Federal Reserve Board.

The Fed regulates banks, influences interest rates, and determines the size of our money supply through a complex process, called Open Market Operations, that involves buying and selling securities (mostly government debt). The Fed's policies determine the value of your money, the health of the economy, and the rates you pay to borrow.

• The Fed's decision-making process is secret, using confidential information.
• Minutes of these secret meetings aren't due until three weeks after decisions are announced.
• Transcripts of meetings don't become available until five years later.
• Aside from the Chair, Fed board members serve the longest terms of any federal bureaucrat (14 years), and they can't be fired for political reasons.
• The Comptroller General, head of the Government Accountability Office, is legally prohibited from auditing the Fed's Open Market operations, and several other important Fed activities. (See our Background page.)
• The Fed is part of the Federal Government, but acts without any of the regular checks and balances.

Some argue that this secrecy and independence are necessary to protect the Fed from partisan political influence. Their argument is reasonable, but it leaves the American people in the grip of a virtual economic dictatorship. And the economic consequences of Fed policies can be just as devastating as taxes, regulations, and even war . . .

• Many economists, including Fed Chair Ben Bernanke, blame the Fed, in one way or another, for the Great Depression
• Many also blame the Fed for the recent housing boom and bust
• In the past two years, the Fed has nearly doubled the money supply, cutting the value of your money in half.

And yet, you have absolutely no control, or even influence, over what the Fed does.

We think the money supply and interest rates are too important to be left to either politicians or unelected bureaucrats. Indeed, no mere human is competent to make such decisions. No one can possibly know what the "proper" level of money and credit should be at a given time. It's a matter of decentralized supply and demand, which only a free market can sort out, through the mechanisms of . . .

• Honest money
• And free banking, subject to the harsh regulations imposed by picky consumers

Auditing the Fed may pave the way to this outcome, by demonstrating the Fed's inherent incompetence.

Thankfully, Congressman Ron Paul of Texas has introduced H.R. 1207, the Federal Reserve Transparency Act. This bill requires an audit of the Fed by 2010. Senator Bernie Sanders of Vermont has introduced the similar S.604 in the Senate. Tell Congress you support these bills. Ask your Congressional employees to co-sponsor and pass these bills.