Bernanke Calls Ron Pauls “Audit The Fed” Bill a Nightmare Scenario

The House voted Wednesday overwhelmingly to validate Rep. Ron Paul’s (R-TX) legislative decade long battle to get the Government Accountability Office (GAO) to audit the very private inaccurately named Federal Reserve, despite the central bank’s chairman warning that such action could result in a “nightmare scenario.”

Members of the House passed Paul’s “Audit the Fed” bill by a vote of 327-98. Only one Republican, Rep. Bob Turner(NY), voted against the bill. 89 Democrats joined Republicans in passing the bill, including outgoing Rep. Dennis Kucinich (D-OH), who cited recent reporting by The Washington Post that claims the New York Federal Reserve knew but did not tell regulators about manipulation a key inter-bank lending rate known as Libor.

“The Fed creates trillions of dollars out of nothing and gives it to banks, Congress is in the dark,” he said. “The Fed sets the stage for the subprime meltdown, Congress is in the dark. The Fed takes a dive on Libor, Congress is in the dark. The Fed doesn’t tell regulators what is going on, Congress is in the dark.”

Senate Majority Leader Harry Reid (D-NV), must like being in the dark as he has refused to bring the bill up.

Paul supported a Fed audit in 2010 that was incorporated into the Dodd-Frank Wall Street Reform and Consumer Protection Act. That audit required the Fed to disclose its lending practices during the 2008 financial crisis, revealing that the bank doled out more than $16 trillion in loans and assets swaps to financial institutions all over the world in an effort to stabilize global markets. Paul was not satisfied as he said ultimately the Dodd-Frank audit was a stripped-down version of his original proposal because it did not examine Fed monetary policy negotiations as well.

Speaking last week to the House Financial Services Committee, which is chaired by Paul, Bernanke warned that any effort by Congress to undermine the independence of the Fed would weaken its ability to stabilize the economy in the event of a crisis like the near-collapse of 2008.

“The nightmare scenario that I have is one in which some future Fed chairman would decide to say, raise the federal funds rate by 25 basis points, and somebody in this room would say, ‘I don’t like this decision and I want the [Government Accountability Office] to go in… and give us an independent opinion of whether or not that would be the right decision,’” he said.

The real nightmare scenario would be the American public actually seeing how the Fed’s manipulative and deceitful actions benefit the few at the expense of the many.

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