The Federal Reserve System (FDS), created in 1913 via the Federal Reserve Act, is the United States’ central bank. It is a quasi-public, quasi-private banking system in that it is a government entity with private components. As America’s central bank, the FDS supervises and regulates the banking system, manages the country’s money supply through monetary policy, maintains the stability of the financial system, and attempts to prevent and contain banking panics.
The importance of the Federal Reserve and its public-private nature have provoked many a conspiracy theory, which is not helped by its Inspector General Elizabeth Coleman’s admission last May that the FDS could not account for $9 TRILLION in “off-balance sheet transactions.”
Coleman’s admission provoked outrage among the American people, who demanded Congress to audit the Federal Reserve. The Fed, in turn, resisted every effort. Its chairman, Ben Bernanke, at one time even used fear tactics, darkly warning that an audit by the General Accounting Office “would be highly destructive to the stability of the financial system, the dollar and our national economic situation.”
At long last, we have victory!
Yesterday, May 11, the Senate actually did something good and useful. By a unanimous and bipartisan vote of 96 to 0, the Senate passed an amendment by Sen. Bernie Sanders (I-Vermont) to audit the Fed. Here’s Sanders’ press release.
WASHINGTON, May 11 – In a major victory for transparency at the Federal Reserve, the Senate today passed an amendment by Sen. Bernie Sanders to audit the Fed and make the central bank reveal which banks received more than $2 trillion in emergency aid during the financial crisis
“The Fed can no longer operate in virtual secrecy,” said Sanders (I-Vt.).
Under his amendment, the Government Accountability Office would conduct a top-to-bottom audit of all emergency actions by the Fed since the start of the financial crisis in 2007. The non-partisan research arm of Congress specifically would be directed to investigate apparent conflicts of interest involving the Fed and CEOs of the largest financial institutions in the country.
In addition to the audit, the Fed for the first time would have to reveal by Dec. 1, 2010, the identities of banks and other financial institutions that took more than $2 trillion in nearly zero-interest loans.
Fed Chairman Ben Bernanke repeatedly refused to tell Sanders and others the names of the banks which took the loans.
“Let’s be clear,” Sanders said. “When trillions of dollars of taxpayer money are being lent out to the largest financial institutions in this country, the American people have a right to know who received that money and what they did with it. We also need to know what possible conflicts of interest exist involving the heads of large financial institutions who sat in the room helping to make those decisions.”
The amendment, approved by a vote of 96 to 0, was a combined effort by conservative and progressive senators and a wide spectrum of grass roots organizations.
The Fed is fighting federal court judgments ordering the central bank to divulge the information that was sought in Freedom of Information Act lawsuits by Bloomberg News and other news organizations.
The information that the Fed has withheld is separate from the $700 billion in Wall Street bailouts approved by Congress under the Troubled Asset Relief Program. Recipients of those funds were posted on the Treasury Department Web site.