Handwritten Notes Show Fed Oversight Bill Neutered On Senate Floor

Legislation to give Congress greater oversight of the Federal Reserve was severely watered down on the Senate floor Wednesday in private negotiations between two powerful Republican senators.

Thanks to an overlooked document posted on the website of Sen. Charles Grassley of Iowa, the top ranking Republican on the Finance Committee, voters can virtually watch the water being dumped into the brew that Grassley had hoped to force the Fed to drink. (See the document at the bottom of this story.)

On page five of Grassley's amendment, he intends to give the Comptroller General of the Government Accountability Office power to audit "any action taken by the Board under...the third undesignated paragraph of section 13 of the Federal Reserve Act" -- which would be almost everything that it has done on an emergency basis to address the financial crisis, encompassing its massive expansion of opaque buying and lending.

Handwritten into the margins, however, is the amendment that watered it down: "with respect to a single and specific partnership or corporation." With that qualification, the Senate severely limited the scope of the oversight.

On the Senate floor, Grassley named the top Republican on the banking committee, Richard Shelby of Alabama, as the man pouring the water.

"Although I would have preferred to include all of the Fed's emergency actions under 13(3), in consultation with Senator Shelby I agreed to limit my amendment to actions aimed at specific companies," said Grassley.

"This modified version of the amendment does not give GAO authority to look at all of that additional taxpayer risk. It is much narrower than the one I originally filed, but it is a reasonable step in the right direction, and it does not threaten monetary policy independence."

The original version of the amendment also scratches out congressional authority to oversee Fed actions as they relate to the TARP bailout or "similar authority that the Board exercises under urgent and exigent circumstances."

Story continues below

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The Senate walked right up to the edge, thought about auditing the Fed, and with the stroke of a pen, backed off. (Or maybe it was a pencil.)

The action the Senate took, however, is not meaningless.

Grassley entered into the congressional record a list of Fed actions that do fall within the limits of the language in his amendment (which could still be eliminated in conference committee negotiations):

1. Actions related to Bear Stearns and its acquisition by JP Morgan Chase, including:

a. Loan To Facilitate the Acquisition of The Bear Stearns Companies, Inc. by JPMorgan Chase & Co. (Maiden Lane I)

b. Bridge Loan to The Bear Stearns Companies Inc. Through JPMorgan Chase Bank, N.A.

2. Bank of America -- Authorization to Provide Residual Financing to Bank of America Corporation Relating to a Designated Asset Pool (taken in conjunction with FDIC and Treasury)

3. Citigroup -- Authorization to Provide Residual Financing to Citigroup, Inc., for a Designated Asset Pool (taken in conjunction with FDIC and Treasury)

4. Various actions to stabilize American International Group (AIG), including a revolving line of credit provided by the Federal Reserve as well as several credit facilities (listed below). AIG has also received equity from Treasury, through the TARP, which would also be captured in amendment #1020.

a. Secured Credit Facility Authorized for American International Group, Inc., on September 16, 2008

b. Restructuring of the Government's Financial Support to American International Group, Inc., on November 10, 2008 (Maiden Lane II and Maiden Lane III)

c. Restructuring of the Government's Financial Support to American International Group, Inc., on March 2, 2009

5. TALF -- finally, amendment #1020 would expand GAO's authority to oversee the TARP, including the joint Federal Reserve-Treasury Term Asset-Backed Securities Loan Facility (TALF)

*Neither* Amendment #1021 nor #1020 would include short-term liquidity facilities:

1. Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility
2. (AMLF)
3. Commercial Paper Funding Facility (CPFF)
4. Money Market Investor Funding Facility (MMIFF)
5. Primary Dealer Credit Facility and Other Credit for Broker-Dealers (PDCF)
6. Term Securities Lending Facility (TSLF)

Fed Amendment -

HuffPost readers: Notice anything else in the amendment? E-mail [e-mail]

Ryan Grim is the author of the forthcoming book This Is Your Country On Drugs: The Secret History of Getting High in America

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Comments

[hankm]

I'm glad we all agree on this one. The Fed must be abolished for the good of our country.

HOWEVER -- be aware! While there is a groundswell of support for this action, there are very powerful interests seeking to give the IMF/World Bank control of our currency instead. So we would only be swapping slavemasters, except this time to a global one.

By all means, support the abolishment of the Fed, but also insist that our sovereign government retain the sole right to control our own currency.

[patriot2012]

While I can agree with the non-aggresive approach of nationalizing the banks, people generally will never get it into their heads that the REAL only way to deal with this whole situation is physically remove all those and burn down every single FED Reserve building in America. The FED RES is the biggest Terrorist of oppression in our Country and only Guns with a mass Army of the People will completely stopped and make those criminals Run from us. That Threat is the only legit way to go with those sort of human beings with to much power in their hearts. We continue to talk and debate all there is about whats wrong, how do we fix this. The Answer is there for us to take. We are just not passionate enough with fire in our Souls to visualize the very evil and destruction before us every day getting away with criminal acts we refuse to believe happening. Its in the people's hands. America has a very big decision to make soon or? I await myself for that given day to finally bring the fight to DC, so we may completely stop the downward spiral of our Nation.

[Sleaky]

A quick lesson on the problems with the Federal Reserve

http://www.youtube.com/watch?v=iYZM58dulPE

[Paul Smith]

As a right-wing conservative, it feels really strange to be agreeing with anything written on the Huffington Post but this is an issue on which we all seem to agree - thank God!

This is a perfect example of 'right' being undone by money and power. Politicians of all stripes are running scared because they know about the gremlins that will be let loose by a complete audit of the Federal Reserve System. As has been mentioned, the best tool we have to right this listing ship we're all on is to kick every single one of them out of office - no exceptions. I have written to my congresscritters and asked them to NOT run for re-election next cycle. That will allow me to continue to support conservative candidates since I will NOT vote for any incumbent. If everyone did the same at all levels of government, we would eventually rid ourselves of the criminals who are getting rich at our expense. I encourage everyone to check out http://www.kickthemallout.com/ to see if that is something you can support.

[Sleaky]

What they don't want you to find out is that our money supply is controlled by the City of London.
Which essentially makes us a British colony.

It's a national security issue.

http://www.youtube.com/watch?v=pbMkQPGHw_8

[gjdavis60]

Of course they will kill this bill through dilution if they can. The Fed is the government's printing press; the vehicle that lets them continue spending when they have run out of tax dollars.

The people who support the House version of this bill, HR 1207, have gained over 170 co-sponsors via relentless email, telephone, and fax messages to their legislators. It is time to turn the firehose of support toward the Senate and let them know we will not fall for any tricks or diversions. Ron Paul's bill calls for an audit of the Fed and any and all of its activities.

Call your senator and demand that the language in the House version of the bill be maintained through the Senate.

You can read about HR 1207 here:

http://www.ronpaul.com/on-the-issues/audit-the-federal-reserve-hr-1207/

[steel71]

Just to add, this is not a LEFT vs RIGHT issue. We need to come together as Americans and fight for our Constitutional Republic. Lets not participate in the divide and conquer (left vs right) paradigm.

[steel71]

Please, everybody listen. The Federal Reserve Bank is a private institution which enslaves our government and the people through debt. Money created out of thin air, loaned to the government-- at interest, then the people are taxed to death. The government can create money-- interest free, without debt. The IRS was created to collect income taxes from the people in the interest of the Federal Reserve. This is unconstitutional to have a central bank in the US, Thomas Jefferson and Andrew Jackson lead the fight against the European international bankers, yes, those banking families subverted out country in 1913. What's the main pillar of the communist manifesto? A central bank!

[ucjb]

The Federal Reserve has failed at it's most basic directive and as for Shelby he should be voted out. Why the hell would you oppose an audit? If you do oppose the audit, can I borrow you checkbook?

[giatny]

I can think of few things more frightening than letting Congress oversee
the Federal Reserve Board. Its independence from politics is the only
hope we have to survive this financial meltdown. Doesn't anyone on this site remember that Congress "oversaw" Fannie May and Freddie Mac and created the $300 BILLION Hope for Homeowners program (which has rewritten 1 mortgage in 8 months). According to Wiki, the Comptroller General of the GAO hasn't signed off on the government's financial statements in 12 years due to lousy accounting. At least the Federal Reserve has a financial statement that balances and Bernanke knows what's on it. I don't think anyone is particularly happy about the extraordinary steps that have been taken, but believing that CONGRESS
could have done better borders on insanity. They don't do anything
well.

[guerilla]

The Federal Reserve is an organization that inflates the money supply which dilutes the purchasing power of the dollar.

To claim that they should not be subject to Congressional oversight (Congress are the reps of the people) is establishing the FED as a financial oligarchy over the American people.

If Congress is not doing it's job, that is an indictment of the entire US government, part of which includes the Federal Reserve.

To say that an elected Congress cannot be trusted but an unelected bureaucrat like Bernanke can, means that America has now completely abandoned it's roots in liberty and embraced a system of feudalism.

This is the reason for the audit powers. The FED is destroying the dollar, and establishing debt on future generations of Americans yet unborn. This sort of behavior is considered immoral by many people, whether they are Christians or Atheists because future debts and present wealth destruction is basically a form of serfdom.

The sane thing to do is to audit the FED, and if the scholars of the Austrian School of Economics are correct about it's nature, then it should be abolished, and monetary powers returned to the people, where they can exercise their control over those powers democratically.

As it is today, the American people have no control over the FED, and the FED answers to no one. The only people with shareholder positions in the FED and who occupy it's boards, are the banks.

Banks cannot be trusted with the printing press.

[Matt Wolf]

Funny, I was under the impression that is was the fed and the easy money policies that created this crisis. The fed has indicated that it will prolong the crisis if anything.

[mayor pufnstuf]

The Congress still would not have any avenue for influencing the economic policies of The Fed with the passing of this bill. The purpose of auditing The Fed would be to expose it's chicanery in influencing the market. Also, to bring the REAL rate of inflation out into the light. Not an estimate of inflation based on CPI.
If these details were exposed to the American people, a popular movement to end The Fed would follow shortly thereafter.

[Ollie Grande]

Giatny, while I am also concerned when congress is involved, if you believe such an importiant function as monetary policy ought to be conducted by an unelected, unaccountable, privately owned, fascist corporate plutacracy, why stop with monetary policy??? Just as the issuance of currency was removed from congress and given to this unelected unaccountable beast, why not also remove from the elected gov DOD, HDS, Trans Dept, commerce Dept, Interior Debt....heck, since you think the Federal Reserve worx so well, why stop at monetary policy? Why not just remoive all functions delegated to congress under art 1 sec 8 of the US constitution and pass it all out to privately owned corporations? If you disagree with that, pleae tell us why you think monetary policy happens to be the one function of gov that's simply too importiant to be conducted by the elected gov and must be handled dictatorially, outside the bounds of elected gov?
Giatny, there is a history of congress handling our currency which can be compared to the period this privately owned dictatorship has han dled our money.. From 1836 to 1913, without a privately owned central bank handling our currency, a dollar retained its value, the general price level remained the same. Since the Fed's creation in 1913, the Fed has increased the money supply to 550 times its 1913 level, and a dollar is worth just 4 cents its 1913 level.

[LunaPark]

The Federal Reserve system has failed its primary mission in spectacular fashion. Auditing the Fed has to be an apolitical issue. Ask yourself, "Why would someone oppose auditing the Fed?"

Dennis Kucinich wants to take control of the Federal Reserve away from private banks and place it under the control of the Treasury.

Ralph Nader says, "The Federal Reserve is a government within a government and completely out of control"

Alan Grayson wants to audit the Fed.

Bernie Sanders wants to audit the Fed.

Ron Paul wants to audit the Fed.

Support HR 1207, or a serious version.

[olmossy]

well it could be Someone paid them to oppose the audit. It could be the Politsters are afraid they will be caught in the audit. Or Both!
Are the kooks and far outers appealing to more of us than they used to? The're starting to look like common sense guys to me.

[archtoplee]

Tacking action means to call your Congressman to audit the Fed.

For a list of the (presently 162 ), co-sponsors to HR1207 go here:http://www.govtrack.us/congress/bill.xpd?bill=h111-1207

If her name or his name is not on the list click here to send an editable e-mail:
http://www.votervoice.net/Core.aspx?AID=972&Screen=alert&IssueId=16611&SessionID=%24AID%3d972%3aUID%3d813958%3aSITEID%3d-1%3aVV_CULTURE%3den-us%3aAPP%3dGAC%24

[henrypapillon]

You mean the Mr. Senator "Holier than thou" Shelby?

[olmossy]

We could go to DC and just tell them how we betrayed we all feel. They would probably listen.
IF I could get about a million angry sold out Americans to go with me..

[Mike Keough]

Look, I don't care how many times Shelby has been elected, now is the time to get his butt out. Again and again it is proved to us, the Citizens, that "from the grass roots up, is the only way we will be protected. Public financing, term limits, and populist folks running, from both parties, is the change we need. That's the only answer to lobbyists and their God Given First Amendment Rights. I have had enough of vested interest. When it comes to the lack of financial regulation I see no difference between Shelby; and Dodd or Barney. They are equally, I want to say ensnared, but the real word is evil. They are feverishly trying to get a cork into the hole in the bottom of our boat, but they drilled it. They drilled it, and covered it, and that needs to be punished. Maybe we have to start balancing the lack of " governmental continuity ", with honest representation. We will never be able to limit campaign contributions. Elected people will not allow it. The fight will again and again go to the Supreme Count ,and limits will forever lose. So the only way to manage this is to render lobbyists contributions as meaningless as we can.
We have to start running for office. We have to stop being afraid of pointing out their voting records, release contribution records, make the connections in the most explicit way possible, and Get These Jerks Out Of Office, Now

[AZ AF VET]

When this mess is over, the status quo will survive. There's just too much money in politics for things to change. Remember Murphy's law and that Murphy was an optimist!

[Julius Goth]

Because the status quo worked wonders for the Soviet Union through 1991.

[Jezreel]

Great post. Thanks for keeping us informed. Unfortunately, try as I might, it is impossible for me to keep up with every piece of legislation. Until, Americans of all political stripes begin holding elected officials accountable for decisions they are making and Bills they are supporting or opposing, we will not have the full benefits of a democracy of, by and for the people.