The House Committee on Financial Services held its first major hearing on H.R. 1207, the Federal Reserve Transparency Act, today. H.R. 1207, originally introduced by Ron Paul (R-Texas), now has 295 cosponsors in the House and a great deal of public support. (The bill’s Senate equivalent, S.604, called the Federal Reserve Sunshine Act, has 28 cosponsors.)

Speaking on behalf of the Federal Reserve was Scott G. Alvarez, General Counsel, Board of Governors of the Federal Reserve System. Speaking for H.R. 1207 was Thomas E. Woods, Jr., author and economist for the Ludwig von Mises Institute. Both made available some prepared testimony.

In his statement Alvarez argued that the Fed already receives an independent audit by an “independent public accounting firm that is selected and retained by the Board’s Inspector General annually [and] audits the financial statements for the Federal Reserve System, including the Reserve Banks. The Federal Reserve makes these audited financial statements available to the public and submits them to Congress with detailed annual reports of our activities.”

He added that “all of our supervisory and regulatory functions are subject to audit by the GAO to the same extent as the supervisory and regulatory functions of the other federal banking agencies.”

Alvarez conceded that “two highly sensitive areas” have been excluded by Congress from GAO review: “one is monetary policy deliberations, decisions, and actions … and the other is Federal Reserve transactions for or with foreign central banks, foreign governments, and public international financing organizations.” These, he said, are “to ensure that the Federal Reserve could ‘independently conduct the Nation’s monetary policy’.…  Thus, the Congress has sought to maintain an independent monetary policy not because it benefits the Federal Reserve, but because of the important public benefit it provides.”

He then contended that H.R. 1207 would remove these exceptions and lead to “a substantial erosion of the Federal Reserve’s monetary policy independence.” This would “undermine public and investor confidence in monetary policy,” which would in turn “increase inflation fears and market interest rates and, ultimately, damage economic stability and job creation.”

Thomas Woods’ remarks set out to refute these and other common arguments against H.R. 1207. Woods argued that the Fed’s independence is a myth. “The bill is not designed to empower politicians to increase the money supply, choose interest-rate targets, or adopt any of the Fed’s central planning apparatus, all of which is better left to the free market than to the Fed or Congress.” Moreover, “ with its chairman up for reappointment by the president every four years….  Fed chairmen have been known to ingratiate themselves into the president’s favor close to election time by means of loose monetary policy and the false (and temporary) prosperity it brings about.”

Woods intimated that the Fed is “independent” in ways that ought to alarm a free people who base their economic lives on an assumption that their money is sound: “The Fed may reward favored friends and constituencies with trillions of dollars in various kinds of assistance, while keeping the public completely in the dark. If that is the independence we are talking about, no self-respecting American would hesitate for a moment to challenge it.”

He argued further that monetary policy is already politicized and favors the well-connected: “Most Americans, not unreasonably, seem convinced of another thesis: that Goldman Sachs, for instance, might be just a little bit more politically well connected than the rest of us.”

Finally, if the Fed is already adequately audited, then “why is the Fed in panic mode over this bill? It is the broad areas these audits exclude that the American public is increasingly interested in investigating, and these are the gaps that H.R. 1207 seeks to fill.”

Woods asked “if our monetary system were really as strong, robust, and beyond criticism as its cheerleaders claim, why does it need to rely so heavily on public ignorance? How can it be a sound banking system that depends on keeping the public in the dark about the condition of its financial institutions?”

In closing, he turned on its head a remark that is often made by those of an authoritarian stripe who believe we should trust our political and financial overlords in all things, including when we believe our rights and privacy are being violated: “The Fed should take to heart the words of consolation the American people are given whenever a new government surveillance program is uncovered: if you’re not doing anything wrong, you have nothing to worry about.”

From an economic standpoint, the Federal Reserve does plenty that can be considered wrong to the point of irrational: creating hundreds of billions of dollars out of thin air, and thus devaluing our currency. Our dollars have lost between 97 and 98 percent of their value since the Federal Reserve was created in 1913 — following the now well-documented, but at the time highly secretive, meeting of powerful banking elites that designed the legislation to create the Fed at their enclave on Jekyll Island, Georgia.

Some might wonder why criticisms of the Fed are limited to just a few mostly solitary economics voices, such as Ron Paul, who are considered not “real” economists by the majority of those in that profession. A recent Huffington Post inquiry revealed the answer to this: for all practical purposes, the Fed owns the economics profession in the United States. You do not get to be an economics professor at a major university if you do not publish in one of the major journals of the field such as the Journal of Monetary Economics. These journals’ editorial boards have a significant fraction of members on the Fed payroll! This ensures that critics of the Federal Reserve will not be published, not receive tenure at major universities, and therefore not be in a position to educate the next generation of economists.

Such revelations help us understand why almost no one in the economics profession anticipated the worst economic meltdown since the Great Depression — which was predicted by Ron Paul, Peter Schiff, and others of the “contrarian” orbit who have subsisted outside of the economics “mainstream.”

Part of taking back our country from the elites necessarily includes taking back the economics profession. Subjecting the Federal Reserve to a full audit is a step toward what would really be desirable, which is to do what Andrew Jackson did to the Second Bank of the United States: close it down, as an institution both unnecessary and destructive of the economic lives of a free people.

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Bonnie said:

Breaking down Alvarez's statements Alvarez conceded that “two highly sensitive areas” have been excluded by Congress from GAO review: “one is monetary policy deliberations, decisions, and actions … and the other is Federal Reserve transactions for or with foreign central banks, foreign governments, and public international financing organizations.” monetary policy deliberations, decisions, and actions - these are the very things we want to know about. transactions for or with foreign central banks, foreign governments, and public international financing organizations - we especially want to know about these! This would “undermine public and investor confidence in monetary policy,” which would in turn “increase inflation fears and market interest rates and, ultimately, damage economic stability and job creation.” undermine public confidence - how can you undermine something that doesn't exist? undermine investor confidence - yes, it would scare the crap out of the insider investors when they know exposure of their plans could make it all fall apart. increase inflation fears - it won't alter inflation itself, it will just increase the the fears of the people who suddenly are made aware of what has been happening and the potential consequences. damage economic stability - not really, just destroying the illusion. damage job creation - for government bureaucracies.

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September 25, 2009
Votes: +17

fazsha said:

Barney Frank bodyslammed Thomas Woods was testifying in favor of 1207 and said "I don't know anyone who is not bought and paid for who wouldn't support an audit of the Fed" as part of his remarks. After some other discussions, Frank, as chairman, circled back to the comment, and said " Mr. Woods, I support the bill, but why would you suggest that someone who is against the bill must necessarily bought and paid for. Who would be bought and paid for, and by whom?" Woods responded "Well, in some cases by the Fed itself." Frank pressed him again, who would be bought and paid for. Woods said, "I don't know anyone in the general public who would be calling your office from the public saying 'I will vote you out of office if you vote for auditing the Fed." Frank pressed him a third time, hoping to get him to apologize or something (perhaps the comment 'bought and paid for' hit too close to home considering Frank's lover is a Fannie Mae exec and Franks received over $40000 in campaign donations from Fannie), and finally, Thomas Woods said "Perhaps it was an 'unfortunate verbal flourish'." Ooofff!!! Down goes Frazier! Down goes Frazier! Franks scowled and muttered, "Next time leave the 'unfortunate verbal flourishes to us'."

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September 25, 2009
Votes: +7

Kenneth Creech said:

... Born in 1933 and beginning school in 1938 till graduating high school in 1952 I never was informed that the "Federal Reserve" was neither federal nor reserve. Federal means a part of our government and therefore controlled by us. Every movement of this organization is designed to control some facet,(Money),of our lives and we are mere pawns on their chessboard. Down with the non federal and non reserve! Their most treasured possession is control of the printing presses!

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September 25, 2009
Votes: +7

still free said:

	Progress... Thank God for Ron Paul and Thomas E. Woods, Jr.
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September 25, 2009
Votes: +7

Bill said:

	Next steps? What happens next - more hearings?
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September 25, 2009
Votes: +1

Joe Sixpack said:

Revoke The Fed Proclamation on the Federal Reserve System of the United States of America www.RevokeTheFed.com Follow Link to Read (I cannot post here- too long) March 2008 WHEREAS, Article I, Section 8 of the Constitution of the United States of America authorizes Congress "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures"; ...WHEREAS, the Federal Reserve System is accepting non-performing assets as collateral for credit with ultimate taxpayer responibility to entities not under its legislative mandate; IT MUST BE CONCLUDED, that the Federal Reserve System is not acting to the benefit of the people of the United States of America, its credit, money, and good name; WHEREAS, it is recognized that the political will and capability of the government of the United States of America may not be up to the task of prosecuting this proclamation ; It is also recognized that this may be the only hope for the continued survival of the United States of America as the great nation as it has historically existed. NOW THEREFORE, it is PROCLAIMED by those supporting this Proclamation that the Congress of the United States of America ... SO HELP US GOD!

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September 25, 2009 | url
Votes: +3

Robert Boger said:

END THE BANKING CARTEL / END THE OLIGARCHY END THE BANKING CARTEL / END THE OLIGARCHY Dear All, There is no bill more important to the fate of the U.S. economy and with it the fate of the American people (read Labor and all workers who exchange 9-2-5 time for money) than HR-1207. You must understand exactly why the oligarch capitalist elite of both parties are terrorified of this bill – including those elite within the Democratic party. It will completely destroy their control and guidance on broad investment in the United States, and their duplicitous trades off that overseas, think labor arbitrage, etc. With the passing of HR-1207 and the eventual end of the Federal Reserve…investing PRIVATE EQUITY in the United States (not just buying our passive government bonds that does nothing for the American people) will be the greatest investment opportunity in over a 100 years. Waves of domestic and international capital post HR-1207 will stop buying our bonds (which is passive to the American people) and start investing EQUITY (which is positive for the American people) direct into America business and will result in the full reverse of our sky rocketing unemployment. It will be an economic reset as if it was the 1880s all over again. We will find ourselves on par with China and others in a way that will upset all American & Chinese globalists (though not European)…..and with it flush down the toilet a whole class of double-faced elites that want nothing more to hold us down where they can arbitrage the American peoples ignorance to the bitter end – which is exactly what is still going on. HR-1207 has broad bi-partisan support. There is NO QUESTION this bill can pass the House and Senate VETO proof. PLEASE CALL AND HARASS BARNEY FRANK AND OBAMA TO STOP STANDING IN THE WAY.

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September 26, 2009
Votes: +4

kelley roberts said:

... i'm in total favor of both bills. if neither make it this time around--then reintroduce them and go at again. more media attention needs to be focused on these bills in order to help draw more attention to them so that more of the electorate will be more informed and realize the real importance and impact that these bills will have on all our lives. i'm a dues paying member of jbs and read the new american because i firmly stand against those that would be our masters that want to rob our liberties from us. so i want to lodge a loud protest about seeing a google add on this page that is bought and paid for by general electric. i may be mistaken but is not general electric one of the largest companies behind the 'global climate change' ? i know that jbs and the new american need money to help their campaign against tyranny, however taking money from your 'enemy' is suspect at the very least. what else is to follow? do not become a slave to money or your destined to become your enemy!

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September 26, 2009 | url
Votes: +2

Flu-Bird said:

	Villians beware So it looks like such wealthy socialists like BARNEY FRANK,GEORGE SOROS, and TED TURNER could get their comeupence at last
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September 26, 2009
Votes: +0

ozzy said:

	... go Ron Paul!!!!
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October 10, 2009
Votes: +0