Dodd Opposes Fed Audit

03/24/2010 05:12 am ET | Updated May 25, 2011
  • Ryan Grim Washington Bureau Chief, The Huffington Post

Senate Banking Committee Chairman Chris Dodd opposes including a provision to audit the Federal Reserve in the Senate's regulatory reform package, the retiring Connecticut Democrat told the Huffington Post Thursday.

The measure made it into the House bill in November after an unusual insurgency led by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.) beat back a concerted effort by the Fed to kill the provision, and won an overwhelming and bipartisan vote in the House Financial Services Committee. It was an unprecedented legislative defeat for the Federal Reserve, which has never had a real audit in its history. Little is known of what it does with the trillions of dollars at its disposal.

And if Dodd has his way, it will stay that way.

"No, no," Dodd said firmly of the audit requirement. "It's not in the Senate bill."

Asked if he wanted it in, he was just as emphatic.

"I don't. No," said Dodd.

The House measure would allow the Government Accountability Office to audit the Federal Reserve's balance sheet, while creating a 180-day delay in the release of any information about market actions the bank has taken, in order to alleviate concerns that Congress would be undermining the Fed's independence from politics.

That's not enough assurance for Dodd, although he said he'd consider opening a window into some of the Fed's operations. "I don't mind certain audit provisions in there, but not the one they did in the House," he said.

Now that financial populism is back in vogue, the audit-the-Fed movement would appear to be that much more attractive to politicians.

But on Wednesday, as the Huffington Post reported, House Financial Services Committee Chairman Barney Frank (D-Mass.) told a private meeting of his Democratic caucus that the House's Fed-audit provision was unlikely to be included in the Senate reform package. Dodd, he told the group, had assured Sen. Judd Gregg (R-N.H.), a vehement opponent of the audit measure, that it would not be part of the final bill.

Judging from Dodd's comments, however, it appears that his own concerns drove the decision as much as Gregg's.

Last November, Gregg said in a statement that "passage of the Paul Amendment by the House Financial Services Committee is a dangerous move by this Congress to pander to the populist anger currently directed against our central bank, the Federal Reserve."

Gregg told HuffPost on Wednesday that while Dodd has not assured him the amendment would stay out of the final bill, he was comfortable that he and Dodd were on the same page.

"I've heard him represent what his thoughts are, but the term 'assurance' is a little different than what I've -- I think Senator Dodd understands this issue, and I can't speak for him, but I believe he agrees that Congress should not be involved in monetary policy," he said.

The committee's top Republican, Sen. Richard Shelby of Alabama, meanwhile, told HuffPost that he's open to an audit. "I was a Fed defender for 22 years -- probably one of the biggest ones on the banking committee," said Shelby, the former chairman of the banking committee and now it's top-ranking Republican. Today, he's become a Fed critic.

"I don't think the Fed should be above an audit," he said, while adding, "I don't think that Congress should try to jeopardize - and I don't they would try to jeopardize - the independence of the Fed on monetary policy."

Frank's spokesman, Steve Adamske, said that the chairman would fight for the House provision when the two chambers meet in conference committee.

"Whether the Fed-audit provision survives or not is up to the gods at this point," said Adamske.