Rep. Thomas Massie (R-Ky.) reintroduced on Jan. 10 his Federal Reserve Transparency Act in the House of Representatives, an annual tradition for the congressman. Dubbed the “Audit the Fed” bill, the legislation is an evolved iteration of a bill put forth by former congressman Ron Paul (R-Tex.) back in 1983.
“It’s official!” Massi wrote in a tweet on Tuesday afternoon. “I just reintroduced my bipartisan bill to audit the Federal Reserve, HR 24.”
It’s official! I just reintroduced my bipartisan bill to audit the Federal Reserve, HR 24. #auditthefed pic.twitter.com/KxXj3JK4hp
— Thomas Massie (@RepThomasMassie) January 10, 2023
Massie’s bill would “require a full audit of the board of governors of the Federal Reserve system and the Federal Reserve banks.”
Paul’s original bill, despite being introduced in the early 1980s, did not receive a vote in the House until 2012, where it passed 337–98 with overwhelming bipartisan support. Former Senate Majority Leader Harry Reid (D-Nev.) refused to hold a senatorial vote on the legislation despite having advocating for a Federal Reserve audit earlier in his career.
The rationale behind the initiative, espoused by free market conservatives like Paul and Massie—who blame the U.S. central bank for its role in the country’s economic instability—is that transparency would better allow the public to prepare for and avoid financial crises.
“I’ve been talking about it for decades and arguing that we had a financial system that was very friable, very vulnerable, and it was the Fed that was creating the bubbles,” said Paul during a speech at the CATO Institute in 2009. “Therefore, we should be looking into it and preventing these problems rather than waiting for a cataclysmic financial crisis to hit.”
Rep. Massie has echoed similar sentiments in the recent past and offered criticisms of his own as to why the public deserves more insight in the central bank.
“The Federal Reserve has, on the one hand, many privileges of government agencies while retaining benefits of private organizations, such as being largely insulated from Freedom of Information Act requests,” Massie said during a speech on the House floor in 2014. “The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the GAO [Government Accountability Office] is prohibited from auditing these agreements.”
The GAO periodically conducts reviews of the Federal Reserve, but these are not full-scale audits and do not include arrangements made with foreign counterparts. Massie’s bill would require the comptroller general, the head of the GAO, to conduct a full audit of the Fed.
Acting Fed Chair Jerome Powell also stressed the importance of transparency at a symposium in Stockholm, Sweden, on Tuesday.
“With independence comes the responsibility to provide the transparency that enables effective oversight by Congress, which, in turn, supports the Fed’s democratic legitimacy,” said the central banker, adding that the Federal Reserve has made substantial progress on that front. “Over the past several decades, we have steadily broadened our efforts to provide meaningful transparency.”
Powell has cautioned against the “audit the Fed” movement in years past, however, saying it could impose undue political pressure on monetary policy.
Critics of the proposal say that U.S. central bankers are already sufficiently audited. Though not conducted by the comptroller general, the Fed is audited annually by an independent public accounting firm retained by the office of the inspector general.
According to a former trader on the Federal Reserve’s Open Market Trading Desk, Joseph Wang, nearly all of the central bank’s financial activities are disclosed to the public, though often with a lag. That said, Wang acknowledged there are certain obfuscated areas.
“One thing that might be of interest to the public is the Fed’s new FIMA [Federal Insurance and Mitigation Administration] repo facility, where it lends money to foreign central banks and governments against Treasury collateral,” he told The Epoch Times. “The borrowers of that facility are not disclosed, but even governments not necessarily friendly to the United States could borrow through it.”
Massie is not the only member of Congress carrying the Ron Paul torch. Paul’s son, Rand, a U.S. senator from Kentucky, continues to advocate for more central bank transparency, introducing bills similar to Massie’s in the Senate in recent years.
In a 2017 interview with Fox News anchor Tucker Carlson, Rand Paul was asked why Americans should want to audit the central bank, to which he replied, “I think an easier question is why wouldn’t we want to audit the Fed? It’s about transparency. It’s about knowing what your government does.”