Sen. Rand Paul (R-Ky.) on May 13 sent a letter to Senate Majority Leader Harry Reid (D-Nev.) warning that he was placing a hold on of three nominees to serve as governors of the Federal Reserve.
The nominees are Stanley Fischer for vice chairman, and Lael Brainard and Jerome Powell for the board of governors.
Paul is demanding consideration of S. 209, the “Federal Reserve Transparency Act,” which according to the letter would “eliminate all restrictions placed on Government Accountability Office (GAO) audits of the Federal Reserve. The Fed’s credit facilities, securities purchases, and quantitative easing activities would also be subject to Congressional oversight.”
That’s a good idea. An annual audit of the Fed’s practices — with particular emphasis on its $55 billion a month of quantitative easing programs — is the least the American people can expect from an institution that has such a wide impact on the economy.
Since August 2007 when the financial crisis began, the central bank has expanded its balance sheet by some $3.4 trillion. Where has it gone? Who received all that money? Those are good questions.
But holding up the Fed governor nominees will likely not do any good.
Holds are an informal practice whereby a senator conveys to the majority leader his objection to unanimous consent of floor consideration of a nominee. Under Rule XXII governing filibusters, to break the hold, Reid would have to schedule a cloture vote to proceed to the nominations.
But, Senate Democrats are no longer following Rule XXII. As a matter of procedure, they have been ignoring it ever since they confirmed Patricia Ann Millett to the D.C. Circuit Court of Appeals without ever getting to 60 votes.
For all intents and purposes, there is no filibuster as it relates to most presidential appointments.
So Sen. Paul placing a “hold” on the Fed governor nominees — a device that in the past could have led to a filibuster — in today’s legislative climate is somewhat pointless.
Besides, the Fed has already been audited, the achievement of Paul’s father, former Rep. Ron Paul (R-Texas), who after an entire career finally had a one-time audit included in the 2010 Dodd-Frank financial legislation.
A better question might be if anyone even read it?
Then, it was ascertained that of the $877.3 billion of mortgage bonds the central bank had purchased that were included in the audit, some $442.7 billion — more than half — were bought from foreign banks.
These included $127.5 billion given to MBS Credit Suisse (Switzerland), $117.8 billion to Deutsche Bank (Germany), $63.1 billion to Barclays Capital (UK), $55.5 billion to UBS Securities (Switzerland), $27 billion to BNP Paribas (France), $24.4 billion to the Royal Bank of Scotland (UK), and $22.2 billion to Nomura Securities (Japan). Another $4.2 billion was given to the Royal Bank of Canada, and $917 million to Mizuho Securities (Japan).
According to the Federal Reserve, the securities were purchased at “Current face value of the securities, which is the remaining principal balance of the underlying mortgages.” These were not loans, but outright purchases, a direct bailout of foreign firms that had bet poorly on U.S. housing.
According to the New York Fed’s website, the purpose of the program was to “foster improved conditions in financial markets.” But whose financial markets were we really propping up? The United States’, or foreign countries’?
The $442.7 billion overseas was just a snapshot in time. The last transactions covered in the audit date all the way back to July 2010.
Since then, the Fed has bought another whopping $1.97 trillion of securities, including $513.5 billion of mortgage-backed securities. And we have no idea where the central bank bought the securities from — because the practice is not audited.
Yet, if the previous audit is any indication, one presumes about 50.4 percent of the $513.5 billion of purchases of mortgage bonds — another $258 billion — has gone to foreign banks.
For Sen. Paul, one of the few members of Congress even concerned about this issue, isn’t that bad enough? Don’t we know enough about the Fed’s practices via the first audit to start to taking some action now?
The Fed is printing trillions of dollars and just giving it away to favored special interests, many of them not even Americans. Now what? How about some legislation reining in the practice altogether?
Waving the Fed audit flag may make for good political fodder, but it seems based on the audit already in hand that the American people have an even bigger problem.
Robert Romano is the senior editor of Americans for Limited Government.
