Washington Lawmakers Demand Transparency From Fed
The assault on the Federal Reserve continues.
From the Associated Press’ Daniel Wagner today:
A group of House Democrats are stepping up demands for greater transparency from the Federal Reserve after reports that the Fed mishandled the bailout of insurance giant American International Group Inc.
The group, led by Rep. Elijah Cummings, D-Md., wants a congressional review of the Federal Reserve system. They want to allow congressional audits of the Fed as part of financial rules being debated by the House Financial Services and Senate Banking committees, according to a letter Wednesday to the committees’ chairmen.
“Real financial regulatory reform cannot occur without an examination into the structure” of the Federal Reserve system, the letter says.
Details on which banks benefited from AIG’s bailout never would have become known without demands from Congress, and a recent report shows flaws in the Fed’s structure as a regulator, the lawmakers write.
The letter follows sharp criticism Monday of the Federal Reserve Bank of New York and Federal Reserve in a report from Neil Barofsky, the special inspector general for the $700 billion financial bailout fund. Barofsky said the Fed may have paid billions more than necessary to banks including Goldman Sachs Group Inc. and Merrill Lynch, now part of Bank of America Corp., to cancel AIG’s contracts with them.
Wagner pointed out that pressure by Washington lawmakers on the central bank has been growing for a while now. He noted:
Many in Congress have long demanded more transparency from the Fed. Those calls have intensified since the financial crisis erupted last fall.
Fed officials have resisted calls for a review of the central bank’s governance. They contend that the Fed already is accountable except in the narrow area of monetary policy, where they say public scrutiny would threaten its independence.
The Fed has proven to be a tough nut to crack. These politicians will find out soon enough, if they haven’t already, how difficult it will be to get any concessions from the central bank on this issue.
Apparently, the Fed is lacking in both transparency and accountability.
Source:
“Lawmakers seek Fed audit after critical AIG report”
Daniel Wagner
Associated Press, November 18, 2009
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