Boding poorly for advocates of transparency for the Federal Reserve, Sen. Ben Nelson (D-Neb.) shot down legislation to audit the Fed Wednesday afternoon that's patterned closely on the Ron Paul bill that has already gained majority support in the House.
Sen. Jim DeMint (R-S.C.) tried to tack his version of the Fed audit bill onto a legislative appropriations bill already chock-full of legislation dealing with the authority or funding of the Government Accountability Office. DeMint's bill would have struck legal restrictions preventing the GAO from auditing the Fed and required the office to report a comprehensive audit to Congress by the end of next year.
"Allowing the Fed to operate our nation's monetary system in almost complete secrecy leads to abuse, inflation and lower quality of life for every American," DeMint alleged. "Americans across the nation, regardless of their position on the bailout, want to know where the money has gone, exactly how much has been spent, and what collateral has been taken in return."
Nelson blocked the amendment from consideration under Senate rule 16, which bars policy legislation from appropriations bills. Anticipating the move, DeMint then pointed out a series of policy provisions affecting the GAO's existing audits of the National Transportation Safety Board, local educational spending and small-business participation in the Alaska national pipeline, as well as a Nebraskan earmark. He confirmed with presiding officer Kay Hagan (D-N.C.) that those provisions also violated rule 16 but had not been struck.
"The majority claims that we do not legislate on appropriations bills," DeMint said, chuckling. "Of course, that is false." It didn't help his amendment, though.
Nelson told the Huffington Post Wednesday evening that he blocked the amendment, unprompted by Democratic leadership, on the basis that it had not been duly considered by the Senate. The other GAO provisions made the cut, he said, because they've had time to be debated on the floor.
"I'm not opposed to audits, but I am opposed to having legislation come up this way," Nelson said, adding that the GAO should have "first crack" at any regulation of the Fed.
The Senate version of the audit bill was first introduced by DeMint and Sen. Bernie Sanders (I-Vt.) last month when the Paul bill surged past the 218 votes needed for passage in the House. At the time, the bill seemed an exemplar of bipartisan consensus: DeMint is one of the Senate's most conservative members and Sanders, a self-described socialist, is perhaps the most liberal.
The Fed has massively expanded its balance sheet since the financial crisis began in September, buying toxic assets and lending hundreds of billions to foreign central banks in unchecked swaps, then sending that foreign currency to U.S. banks.
Politicizing monetary policy through regulation, so the conventional wisdom goes, would destabilize the financial system, devalue the dollar and lead to higher interest rates. But DeMint argued Wednesday, to no avail, that the Fed's lack of transparency is more dangerous.
This is not the first failed Senate attempt to force sunshine on the Fed. Two months ago, another transparency bill was crippled in a backroom deal between two powerful Republican senators. Charles Grassley of Iowa, the top Republican on the Senate's finance committee, agreed to neuter his bill after negotiations with the highest-ranking Republican on the banking committee, Richard Shelby of Alabama.
In the House, Paul (R-Texas) told the Huffington Post he wasn't surprised DeMint's amendment, which he discussed with the senator, was blocked. Paul, who introduced his first Fed audit bill in 1980 with 18 cosponsors, is now up to 250 cosponsors. "Perseverance," he said.
WATCH DeMint's Senate floor speech: