Congress created the Federal Reserve in 1913. The Fed issues our currency. The Fed also deals in secret with foreign governments and buys securities in our U.S. markets. There may be good reasons for the Fed not to tell us what it plans to do, but we have a right to know what the Fed has done. It’s time to comprehensively audit the Federal Reserve.
What determines the value of a dollar? The simple answer is that a dollar is worth what someone will give you for it. It is a medium of exchange, with backing by the balance sheet of the Federal Reserve. Significant financial operations of the Fed are unknown, such as swap agreements with other countries and other financial institutions.
So what’s the problem with a comprehensive audit? Those against an audit seem to have three arguments: (1) The Fed is already audited; (2) An audit would reduce the effectiveness of the Fed; and, (3) An audit would politicize the Fed.
All three arguments aren’t sufficient to deny the public a right to know what’s happening with its currency and its monetary system. If the Fed is already audited, then detractors don’t need to worry about another one. I’m not for more government, but I do want to know what the Fed has been up to. I know there are bunches of audits, but none is comprehensive.
The second argument is that information or the request for information could be used in politics. Of course it could! The beauty of our government is that it is based on checks and balances. Congress passes laws and funds the government. The Executive (President) implements and enforces the laws. The Court rules on whether laws are Constitutional and whether they have been broken. The beauty is that those passing laws (Congress) do not enforce them (Executive). Those ruling on the laws (Court) are not supposed to write them (Congress). The Fed operates pursuant to laws passed by Congress, but Congress does not have adequate oversight. Therefore, Congress does not know if things need to change. I don’t like the current Congress, and I am disappointed at most of what they do. Still, it’s Congress’s job to oversee laws and amend them as necessary. Unless Congress knows what’s going on, they can’t even know if things need to change.
Finally, there is the argument that the Fed would be less effective if we knew what it was doing in hindsight. This could be a reason to audit the Fed, rather than to avoid an audit. We don’t know what the Fed has done! I am not arguing that we need to know what the Fed will do in the future, but I’d certainly like to know what it did in the past. Without periodic complete disclosure, things can get very far out-of-hand. Please support auditing the Fed, and please encourage Congress to let us know what’s happening at the institution that’s responsible for our dollars – the Federal Reserve.
Tom Underwood
April 2010
