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."
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
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)
HuffPost readers: Notice anything else in the amendment? E-mail firstname.lastname@example.org
Ryan Grim is the author of the forthcoming book This Is Your Country On Drugs: The Secret History of Getting High in America