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04.30.2009 0

Time for Sunshine on the Creature

  • On: 05/20/2009 09:54:58
  • In: Monetary Policy
  • By Robert Romano

    The Creature from Jekyll Island may be getting a little sunshine at last. And it may prove to be even more hideous than once thought.

    On February 26th, Congressman Ron Paul introduced the “Federal Reserve Transparency Act of 2009,” legislation that would require an audit of the Federal Reserve Board of Governors and the Federal Reserve Banks. And why does he think this necessary?

    Well perhaps one reason is because, according to Bloomberg News, the Fed as of March 31st has committed, lent or disbursed $7.76 trillion—in tax funds—over the preceding 20 months.

    And yet, nobody is allowed to know anything about it. Just ask Bloomberg News.

    Much of the money cannot be accounted for, including nearly $2 trillion of loans made by the Fed—because the Fed refuses to account for it. According to Bloomberg, “The Federal Reserve so far is refusing to disclose loan recipients or reveal the collateral they are taking in return.” Thus far, the Fed has argued that it is allowed to withhold “internal” memos as well as commercial and trade secrets information. Bloomberg News is not budging, however, and has formally filed a Freedom of Information Act (FOIA) request.

    But the editors at Bloomberg better not hold their breath waiting for a legitimate response. According to this May article from their own publication, “While the Fed’s Washington-based Board of Governors is a federal agency subject to the Freedom of Information Act and other government rules, the New York Fed and other regional banks maintain they are separate institutions, owned by their member banks, and not subject to federal restrictions.”

    In an email to Bloomberg Jennifer J. Johnson, the secretary for the Fed’s Board of Governors wrote, “Notwithstanding calls for enhanced transparency, the Board must protect against the substantial, multiple harms that might result from disclosure… In its considered judgment and in view of current circumstances, it would be a dangerous step to release this otherwise confidential information.”

    Much to the dismay of the news outlet, and to the American people at large, the infamous Creature from Jekyll Island (to use G. Edward Griffin’s nomenclature) is hiding behind a façade of law and excuses to keep and ensure operational secrecy.

    To make matters worse, in answering questions from Congressman Alan Grayson (D-FL) recently, Fed Inspector General Elizabeth Coleman testified she could not account for “$1 trillion-plus that the Fed extended and put on its balance sheet since last September…”

    Even worse, an email to Bloomberg by Coleman’s office revealed that “By law, we are the Office of Inspector General for the Board of Governors only… Consistent with our authority, we cannot conduct a direct audit of Reserve Bank operations [emphasis added].” This is remarkable. And it is frightening that a de facto agency of government created by Congress responsible for $7.76 trillion in transactions—is beyond the oversight of Congress.

    Congressman Paul’s legislation would change that. It would require the Comptroller General to issue an audit of both the Board of Governors and Reserve Bank operations, which are run by member banks of the Fed. The audit would have to be issued to Congressional leadership by the close of 2010. So far, the Act has 165 cosponsors, including 26 Democrats and 139 Republicans.

    But, for now, the Reserve Bank operations are beyond the reach of law, Congress, the Fed itself, and most importantly, American taxpayers who are responsible for paying back the multi-trillion dollar tab being racked up by those operations. The Fed’s own inspector general says she cannot audit them. Freedom of Information Act requests cannot penetrate those operations.

    These are governmental operations directly responsible for the gargantuan increases in the money supply over the past many decades. And yet, its operations are protected—by law—in a shroud of secrecy deemed essential to economic “security.”

    With that much money being tossed out the back door, such secrecy could easily be abused. Hundreds of billions if not trillions of dollars could be outright stolen. Or, at the very least, completely wasted.

    So, where is the taxpayers’ money going? Nobody is saying.

    Which means this hideous Creature will be able to continue satiating its rapacious appetite, while taxpayers are forced to feed its habit with no end—or information—in sight.

    Robert Romano is the Senior Editor of ALG News Bureau.

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