â€œThe Fed can no longer operate in virtual secrecy,â€ declared Vermont independent Bernie Sanders Tuesday after the Senate voted 96-0 to add his â€œAudit the Fedâ€ amendment to the financial regulatory reform bill.
The Senate amendment is not as muscular as the bipartisan legislation backed by the House, which was sponsored by Florida Congressman Alan Grayson, an aggressive progressive, and Texas Congressman Ron Paul, an equally aggressive conservative with libertarian leanings. The Grayson-Paul bill authorizes audits by the Government Accountability Office of every item on the Federal Reserveâ€™s balance sheet, including all credit facilities and all securities purchase programs; there would be exemption only for unreleased transcripts, minutes of closed-door meetings and the most recent decisions of the central bank. The Senate measure is narrower in its focus, but it would require the GAO to scrutinize some several trillion dollars in emergency lending that the Fed provided to big banks after the September 2008 economic meltdown.
The actual amount of public money that has been set aside for private banks is not known. Thatâ€™s one reason why this audit is so important. But there can be no doubt that the figure is astronomical. The Center for Media and Democracyâ€™s Wall Street Bailout Tally shows that since 2008, the U.S. government has flooded Wall Street banks and financial institutions with $4.7 trillion dollars in taxpayer money, mostly in the form of loans from the Fed reserve. The Fed has never told us which firms got these loans and what type of collateral American taxpayers got in return. This will now be revealed. We will also get an accounting of the Fedâ€™s â€œstealthâ€ bailout of Fannie Mae and Freddy Mac.
Sanders tried to pass a broader amendment, but when he faced roadblocks — and the prospect that audit language might be excluded entirely from the final bill — he agreed to propose an amendment outlining the one-time audit of post-meltdown Fed activity. That did not sit well with all senators. Even as Republicans such as New Hampshireâ€™s Judd Gregg tried to prevent any demand for transparency, Louisiana Republican David Vitter proposed tougher language along the lines what Grayson and Paul pushed through the House. While most Democrats and a number of Republicans opposed the tougher language, Sanders joined the most serious reformers in the Democratic caucus — Wisconsinâ€™s Russ Feingold, Washingtonâ€™s Maria Cantwell, North Dakotaâ€™s Byron Dorgan, Arkansasâ€™s Blanche Lincoln, Virginiaâ€™s Jim Webb and Oregonâ€™s Ron Wyden — in voting â€œyes.â€
The Vitter amendment failed on a 62-37 vote and Feingold was especially disappointed. â€œUnfortunately,â€ the Wisconsin progressive declared, â€œthe defeat of the Vitter amendment means American taxpayers will still not have a complete picture of how one of the most powerful government agencies makes policy and spends their tax dollars.â€
Still, Feingold acknowledged that, â€œSenator Sandersâ€™ amendment will mean more transparency for the Federal Reserve, so the public will have a better idea of how it is spending taxpayer dollars.â€
That transparency is consequential, noted Sanders. â€œLetâ€™s be clear,â€ he explained, â€œwhen trillions of dollars of taxpayer money are being lent out to the largest financial institutions in this country, the American people have a right to know who received that money and what they did with it. We also need to know what possible conflicts of interest exist involving the heads of large financial institutions who sat in the room helping to make those decisions.â€
The â€œAudit the Fedâ€ language that is included in the final legislation remains to be seen, as the differences between the House and Senate proposals will have to be reconciled by a conference committee. That will provide an opening for Grayson, Paul, Sanders and their allies to push for the broadest possible transparency. But, make no mistake, there will be pushback.
Fed Chairman Ben Bernanke has repeatedly refused to respond to demands from Sanders and others for information about the banks that have been bailed out by the taxpayers — and that continue to pad their accounts with public dollars. President Obama, Treasury Secretary Tim Geithner and their aides are critics of the â€œAudit the Fedâ€ push, as well.
So why, with so much official opposition, did the â€œAudit the Fedâ€ movement win a 96-0 vote in the Senate? Campaigners on the left and right made the issue a high priority. A good deal of credit must go to Sanders and Paul — long-time critics of the Fed who opposed the 2008 Wall Street bailouts and then steered anger at those bailouts toward the â€œAudit the Fedâ€ movement — which was boosted on the left by websites such as Jane Hamsherâ€™s Firedoglake and on the right by the Paul-linked Campaign for Liberty, as well as by outspoken economists such a Dean Baker and watchdog operations such as CMDâ€™s BanksterUSA project.
Ultimately, however, much of the credit must go to Grayson, who embraced Paulâ€™s proposal — which had languished in the House — and led the campaign to get Democrats to sign on to the bill. As Hamsher says, â€œTremendous credit goes to Alan Grayson. It was Grayson who decided to take up Ron Paulâ€™s bill and bring Democratic support for it.
Sanders, who took some hits for compromising, also deserves credit at this point for making sure, even when he was forced to trim back on his amendment, that critical elements of the initial proposal by Paul — especially the defined role for the GAO — were retained. That will make it harder for the Obama White House and their allies in the congressional leadership to gut the audit language in the conference committee.
There will, as well, be additional fights:
â€œWhile passage of Senator Sandersâ€™ amendment will provide some long overdue accountability and transparency for the Federal Reserve, the overall bill still needs a lot of work,â€ said Feingold. In particular, Feingold and other real reformers have focused on the need for the bill to restore the firewall between Main Street banks and Wall Street securities firms and insurance companies, which contributed to financial institutions growing â€œtoo big to fail.â€
While the bipartisan support for auditing the Fed represents a step in the right direction, Feingold is right when he says it is only one step on a long road toward addressing the way in which bad decisions by Congress â€œled to deregulation and the increased concentration of economic power and economic decision-making.â€
John Nichols is Washington DC correspondent for The Nation magazine.