"Without a full audit of the Federal Reserve, Congress cannot perform its constitutional role of oversight of the central bank. The Senate just voted to keep its blinders on, and to bow at the altar of central planning."—ALG President Bill Wilson.
May 11th, 2010, Fairfax, VA—Americans for Limited Government President Bill Wilson today denounced the U.S. Senate for failing to adopt an amendment to the Dodd financial takeover bill that would have authorized a full audit of the Federal Reserve including its dealings with foreign governments.
"On Sunday, the Fed decided to bail out Europe with a credit line after the Fed Chairman Bernanke promised Congress that it would not do so," Wilson said.
"The Fed and European Central Bank are essentially guaranteeing the bond sales of bankrupt countries. Without the Vitter amendment, the Federal Reserve will continue to operate in secret and with impunity, endangering the financial system, weakening the dollar, and subsidizing risky bets in the markets," Wilson explained.
"Making matters worse, the Senate is telling the American people that they do not have a right to know about this and other Fed transactions with foreign central banks and governments."
An amendment offered by Senator David Vitter (R-LA) would have lifted restrictions on the Government Accountability Office that pursuant to 31 USCA §714(b) prohibits it from auditing the Federal Reserve's transactions with foreign central bank and governments, its deliberations, decisions, or actions on monetary policy matters, its discount window operations, the reserves of member banks, securities credit, interest on deposits, open market operations and transactions.
"The Vitter amendment was an anti-bailout amendment, and the Senate just said no to stopping bailouts or even conducting any oversight of them. Instead, the Senate just issued the Fed a blank check that it does not even want to know about what the central bank is up to. The American people should not be surprised, then, when the Fed bails out more foreign countries that cannot pay their own debts," Wilson warned.
Yesterday, Wilson had denounced Federal Reserve Chairman Bernanke for going back on his word that the Federal Reserve would not be participating in any foreign bailouts after the central bank announced it was extending a credit line to foreign central banks, including the European Central Bank, to bolster lending in near-bankrupt countries like Greece, Portugal, Ireland and others.
At the time, on February 24th, Bernanke told the House of Representatives, "we have no plans whatsoever to be involved in any foreign bailouts or anything of that sort."
"Ben Bernanke misled Congress about the Fed's European bailout, and now the U.S. Senate is covering up for him," Wilson said.
Wilsons has previously noted that the Federal Reserve was a "principal actor" in causing the financial crisis: "By keeping interest rates too low for too long, the Fed accommodated the inflation of the housing bubble throughout the 1990's and 2000's by pumping easy money into the system."
Wilson cited research by Stanford economist John Taylor who in a recent Wall Street Journal column wrote, "the Fed's target for the federal-funds interest rate was well below what the Taylor rule would call for in 2002-2005. By this measure the interest rate was too low for too long, reducing borrowing costs and accelerating the housing boom. The deviation from the Taylor rule, which had characterized good monetary policy during the previous two decades, was the largest since the turbulent 1970s."
"Clearly, the Dodd financial bill is a farce, and will not even be addressing one of the root causes of the financial crisis. Without a full audit of the Federal Reserve, Congress cannot perform its constitutional role of oversight of the central bank. The Senate just voted to keep its blinders on, and to bow at the altar of central planning," Wilson concluded.