Sen. Hagan and an Audit of the Federal Reserve

She also notes that “The formulation of monetary policy is a decision-making process that involves information gathering from a host of foreign governments and central banks.”  This is my favorite line from her email.  She actually admits that foreign governments and their central banks, in collaboration with our central bank, are creating our monetary policies as we speak!!  The IMF would be so happy to hear her say that…. 

Eric Canup

— On Wed, 3/17/10, [email protected] wrote:

From: [email protected]
Subject: Federal Reserve Sunshine Act
To: [email protected]
Date: Wednesday, March 17, 2010, 4:10 PM

March 17, 2010

Dear Friend,

Thank you for your message expressing support for the Federal Reserve Sunshine Act. I appreciate hearing your thoughts on this important issue.

The Federal Reserve Sunshine Act (S. 604 / H.R. 1207) was introduced in the Senate on March 16, 2009, and in the House of Representatives on February 26, 2009. The Senate bill was referred to the Committee on Banking, Housing, and Urban Affairs and the House bill was referred to the Committee on Financial Services. Both bills reform the manner in which the Board of Governors of the Federal Reserve System is audited by the General Accountability Office (GAO) and the manner in which such audits are reported.

Under the Federal Banking Agency Audit Act (PL 95-320), the GAO has the authority to conduct financial and performance audits of the Board of Governors, and the Federal Reserve banks and branches. However, such audits are limited, as the law stipulates that monetary policy operations, foreign transactions, and the Federal Open Market Committee operations are excluded from the scope of the GAO audits. The Federal Reserve Sunshine Act seeks to expand the GAO’s authority by removing these limitations.

As the Federal Reserve Sunshine Act is currently written, I am opposed to the legislation. Under common usage of the term audit — an examination of accounts and records — there is already a 100 percent audit of the Federal Reserve. Furthermore, Congress already reviews semi-annual reports on monetary policy submitted by the Board of Governors as required under the Full Employment and Balanced Growth Act (PL 95-523).

When Congress passed the Federal Banking Agency Audit Act in 1978, the legislation attempted to balance the need for public accountability of the Federal Reserve with the need to insulate the Reserve’s monetary policy function from political pressures. I believe this balance must be maintained going forward.

The formulation of monetary policy is a decision-making process that involves information gathering from a host of foreign governments and central banks. The information provided from those exchanges is critical and extremely sensitive. The immediate and broad disclosure that S. 604 would require could disrupt the financial markets, and jeopardize our country’s international finance relationships. Ultimately, it would be taxpayers who would bear the brunt of any losses resulting from policies caused by untimely disclosure of sensitive information. Because of this, I do not believe the benefits of legislation like the Federal Reserve Sunshine Act outweigh the costs.

Again, thank you for contacting my office. It is truly an honor to represent North Carolina in the United States Senate, and I hope you will not hesitate to contact me in the future should you have any further questions or concerns.

  Sincerely,

  Kay R. Hagan