House Committee to Consider Fed Audits Tomorrow, Frank Says

House Committee to Consider Fed Audits Tomorrow, Frank Says
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By Scott Lanman and Alison Vekshin

Nov. 18 (Bloomberg) -- The House Financial Services Committee will consider measures tomorrow on the powers of congressional investigators to audit the Federal Reserve, the panel’s chairman said today.

Representative Barney Frank, the chairman and a Massachusetts Democrat, said the committee would take up Fed audit proposals during this week’s debate on legislation to create a council of regulators to monitor for systemic risk.

A Democratic proposal would permit audits that are narrower in scope than a Republican proposal and retain the ban on audits of Fed interest-rate decisions. That may set up a clash with Representative Ron Paul, the Texas Republican who signed up more than 300 co-sponsors on a bill to require Fed audits, including the interest-rate decisions, a step the central bank opposes.

The amendment to be offered by Representative Mel Watt, the North Carolina Democrat who chairs a subcommittee on U.S. monetary policy, would limit Government Accountability Office audits of Fed emergency-loan programs to their operations, excluding decisions and internal talks about the facilities. Identities of borrowers would be released a year after the programs end.

Watt’s plan has more limits than a proposal released last week by Senate Banking Committee Chairman Christopher Dodd.

Congress is considering broader legislation stripping the Fed of some powers, including removing its consumer protection authority and giving it to a Consumer Financial Protection Agency.

Bill ‘Gutted’

Paul, who wrote a best-selling book this year called “End the Fed,” said last month that his bill had been “gutted” by Watt while moving toward a vote in the Democratic-controlled House. Watt responded that “we don’t want to have politicians second-guessing the Fed on monetary policy” and said Paul was “exaggerating.”

Watt’s draft measure, provided to Bloomberg News yesterday, allows for audits of Fed operations including supervision of banks, bailouts of individual companies and check-clearing functions.

For Fed emergency programs accessible to a group of companies, such as the commercial-paper facility, the GAO’s audits would be limited to ensuring that the programs are operating according to Fed procedures and avoid risk and fraud.

The GAO would be barred from auditing, reviewing or making recommendations on the Fed’s decisions to create or terminate a facility, its terms and conditions and any “deliberations, discussions or communications among or between” Fed officials and employees, Watt’s proposal says. It also doesn’t permit GAO audits of monetary policy.

Frank said yesterday the full House will consider his regulatory overhaul legislation in December. Dodd, a Connecticut Democrat, plans to hold a committee meeting tomorrow to discuss financial-overhaul legislation.
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