Audit The Fed Effort Wins Support From An Unusual Coalition

An unusual coalition of progressive economists, labor leaders, and bloggers has decided to fight back against a congressional amendment that would allow the Federal Reserve to continue operating in secrecy.

In a Thursday letter to the House Financial Services Committee, economists like Dean Baker and Rob Johnson, author Naomi Klein, and such labor luminaries as the AFL-CIO's Richard Trumka and the SEIU's Andy Stern, urged committee members to shoot down an amendment by Rep. Mel Watt (D-N.C.) that would essentially allow the Fed to keep the lights off while it throws money around.

Watt's amendment, which could see a House vote today, is a direct attack against a separate measure by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.). That measure, known as the "Audit the Fed" bill, has been gaining momentum in Congress for months.

"A vote for the Watt amendment is a vote for more secret bailouts," the letter says.

The letter notes that during the financial crisis of the past two years, the Fed's role has shifted from simply setting monetary policy via interest rates to rapidly acquiring "a wide variety of private assets and extend[ing] massive secret bailouts to major financial institutions."

Among those bailouts, critics argue, was the Fed's funneling of cash to AIG counterparties. Earlier this week, a government watchdog issued a blistering report that blamed the Federal Reserve for withholding details of its massive rescue of AIG last fall. In particular, the report blamed the Federal Reserve for paying for botching its private negotiations regarding the price AIG's rapidly souring derivatives investments, a secret move that cost taxpayers at least $13 billion.

Watt's office on Wednesday circulated a letter from what it called a "political cross section of prominent economists" who supported the amendment. All but one of those economists are currently or have previously been on the Fed payroll.