The Obama administration offered to date its most direct opposition to an amendment to Wall Street reform legislation that would allow for an audit of the Federal Reserve, though administration officials declined to say whether the president would veto a bill that included the proposal.
In a briefing on Thursday, Deputy Secretary of the U.S. Department of the Treasury, Neal Wolin expressed concern that the amendment, authored by Sen. Bernie Sanders (I-VT), would damage the independence of the Fed -- either in perception or practice. The administration has pushed a side amendment that Wolin said would accomplish the goals of Sander's proposal but would not bring politics into monetary policy.
"We oppose the Sanders amendment in its current form," Wolin said. "Transparency of Fed is critically important... But we also think it is important that the Federal Reserve board have independence. We think that countries that have had... the perception of political influence in their central banks have had real problems."
Would the president veto a bill that included the amendment? "We are continuing to work with Senator Sanders, Senator [Chris] Dodd (D-CT) and others to make sure we can accomplish these twin objectives," Wolin replied. "We will move forward in those discussions before we get to discussions about vetoes."
Over the past few weeks and months, Sanders has done yeoman work lining up support behind his proposal. He had been in regular contact with White House Chief of Staff Rahm Emanuel about the issue before learning on Thursday (via the New York Times) that the White House has pushed an alternate amendment as a means of killing his one.
On Thursday, nevertheless, the senator received a major endorsement in the form of explicit backing from Majority Leader Harry Reid. As for the White House's concerns, the senator has stressed repeatedly that he is not interested in politicizing central banking, merely getting a clear sense about where the $2 trillion in low-interest loans paid by the Fed actually went since the recession began.
Asked about this pushback, Wolin again insisted that the White House supports the spirit of the provision but not the legislative language. He said the administration also wants to know who received bailout funds. But, he added, "we think that is an incredibly important principle... what we want to make sure at the same time is that the provision doesn't in an unintended way get into the area of monetary policy that encroaches on the central bank's independence."
Sander's amendment, he concluded, "take[s] down some barriers that have existed for some time now... with the respect of GAO not getting into the middle of monetary policy. That's the kind of thing we are worried about."
UPDATE: Huffington Post's Ryan Grim reports that Sanders has agreed to a compromise on his amendment that would essentially affirm that the audit would not touch the Fed's monetary policies. The agreement won the backing of Senate Banking Committee Chairman Chris Dodd (D-Conn.). And in a statement on Thursday afternoon, Wolin indicated the White House would support it too.
We appreciate the work of Senator Sanders and Senator Dodd to work together on a strong amendment that ensures full and open transparency regarding emergency lending programs, without compromising the Federal Reserve's full independence with respect to the conduct of monetary policy.
Senator Sanders' revised amendment provides for a comprehensive GAO audit of the Federal Reserve Board's operations in response to the recent financial crisis, while preserving the existing protections of the Federal Reserve's independence with respect to monetary policy.
We are confident that the revised amendment proposed by Senator Sanders strikes the appropriate balance: providing full transparency of lending programs while protecting the bedrock principle of central bank independence on monetary policy that has served our nation so well.