My Congressman John Spratt on HR1207

A Response from Rep. John Spratt regarding HR1207, 'Audit the Fed'

Thank you for contacting me to express support for HR 1207, the Federal Reserve Transparency Act of 2009.

If passed, HR 1207 would direct the Comptroller General "to complete, before the end of 2010, an audit of the Board of Governors of the Federal Reserve System and of the federal reserve banks" and follow with a detailed report to Congress.

The current financial crisis has heightened interest in the role of the Federal Reserve (Fed). Besides its traditional role of controlling the monetary supply, the Fed has taken unprecedented actions as a "lender of last resort" to the nation's financial system. First, the Fed has expanded its direct lending programs to non-member banks, purchased financial securities, and intervened to support certain financial instruments, like commercial paper. Second, the Fed has provided assistance to keep financial institutions from failing, particularly those considered "too big to fail." As Congress considers proposals to strengthen financial regulation, the debate has centered on whether the Fed's powers should be expanded or reduced. An accounting of the Fed's assets and liabilities would be helpful as this debate continues in Congress.

HR 1207 would vest the Comptroller General with major new powers. The Comptroller General heads the Government Accountability Office, which is considered an arm of the Congress; and while the GAO does a lot of audit work throughout the government, its expertise is not financial institutions or financial regulatory agencies. If the GAO is granted significant oversight jurisdiction of the Fed, the rest of the world, which looks to the Fed for independence and strict stewardship over the dollar, may conclude that the Fed is now beholden to Congress and cannot be trusted to control the monetary supply and avoid inflation. We have to be wary of sending such signals to the world's financial markets. We do not want to give anyone a reason to dump the dollar.

The Fed is already subject to audit, and I would readily vote to expand that audit, if needed. For example, I have no problem with expanding the audit to cover Open Market Committee transactions. The entire financial regulatory system is currently under study, and recommendations to increase the accountability of the Fed are likely to emerge from that study. The chairman of the Financial Services Committee has recently indicated that he will bring this or a similar bill to the floor for a vote, and I am waiting to see what form that bill will take. I doubt that HR 1207 will be considered separately from other regulatory proposals, but I understand your concerns about the Fed, and share them, and expect to vote for whatever bill eventually emerges from committee. My only concern is that I would prefer auditors other than the GAO for this purpose.

Thank you again for contacting me and please continue to stay in touch on issues of importance to you that come before Congress.

Respectfully,
John M. Spratt, Jr.
Member of Congress