Friday, June 24, 2011
PAUL: Time to end Federal Reserve secrecy
Among the facts that the Federal Reserve would rather you didn’t know is that at the height of the financial turmoil in 2008, when average Americans were just beginning to suffer, the institution was passing out sweetheart deals to protect the powerful and well-connected. Among the beneficiaries were foreign banks, Wall Street giants and even the company that then owned MSNBC.
Recently, my House subcommittee on domestic monetary policy held a hearing to examine information disclosed by the Federal Reserve about its bailout lending during the 2008 financial crisis - disclosure that was required by the Dodd-Frank Act and the Freedom of Information Act.
These Federal Reserve records, made available to the public on Dec. 1, 2010, and on March 31 provided a look at thousands of transactions and trillions of dollars in lending by the Federal Reserve.
The importance of this hearing cannot be overstated.
The conduct of the Fed and the operations of its lending facilities, especially during the most critical periods of the financial crisis, require intensive oversight and the utmost transparency.
Had it not been for the actions of grass-roots activists intent on holding the Fed accountable, none of this information would have seen the light of day. The Fed not only protested these transparency efforts every step of the way, but also predicted financial disaster if details on the recipients of those funds were released.
Several months after the disclosures, the only disaster is the continuing refusal of the White House and Congress to rein in an out-of-control Fed and exercise effective oversight of its monetary policy.
In fact, as I pointed out during the hearing, much of the data we received in these disclosures were heavily edited by the Fed.
Like the majority of Americans who support my push for full transparency for the Fed’s monetary policy, I want to know the whole story about the Fed’s actions leading up to the crisis and beyond - not just the parts it chooses to disclose. Countless lives have been ruined by the havoc created by the Fed’s loose monetary policy, and Congress owes it to those Americans to prevent another financial crisis from happening.
Not holding the Federal Reserve accountable for its actions is the epitome of negligence. Unlike the story sold to the American people in 2008 - that the economy would grind to a halt without trillions of dollars in bailouts - the truth has turned out to be very different.
And let me tell you - Americans will be outraged when they see what the Fed has done.
For example, money was lent to major firms such as Goldman Sachs at rates as low as 0.01 percent, essentially a free loan to the politically well-connected. Non-banks such as General Electric and Verizon Communications got Fed loans. Banks partly owned by the Chinese government received billions in loans.
We now know that at the peak of the crisis, the Fed was providing nearly 90 percent of its discount window loans to foreign banks and even lent billions of dollars to a bank partially owned by the Bank of Libya.
Those actions warrant further investigation into how the Fed operates.
It is little wonder the Fed so ardently opposed the grass-roots audit movement as it was duping the American people into bailing out its Wall Street cronies and sending billions of dollars overseas.
While everyday Americans suffered through the Great Recession, Wall Street and politically connected insiders benefited from their ties to receive a reprieve from the consequences of their bad decisions - and Congress stood by and did nothing.
Given what we know now, we cannot afford to waste any more time and must take action right away to permanently lift the Fed’s veil of secrecy.
I have reintroduced my Audit the Fed legislation, the Federal Reserve Transparency Act, to require full transparency and accountability from the Federal Reserve, and my subcommittee will continue to hold hearings on the Fed’s policies. It is long past overdue that Americans learned the truth about what happens inside the central bank that holds absolute power over the value of their money, the health of the economy and the strength of the nation.
Rep. Ron Paul is a Texas Republican.
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