Reply from Capuano on HR1207

July 8, 2009

Mr.
Somerville, MA 02144-3123

Dear Mr. :

Thank you for contacting me to express your thoughts regarding the Federal Reserve Transparency Act. I appreciate hearing your views on this issue.

Introduced in March by Rep. Ron Paul, the Federal Reserve Transparency Act (H.R. 1207) eliminates restrictions on the ability of the U.S. Government Accounting Office (GAO) to publicly audit the Federal Reserve and calls for an audit by the end of 2010.

I respect your views and share many of your concerns. Over the past several months of the financial crisis, I have expressed my reservations about specific actions and inactions by the Federal Reserve and would like to see additional Congressional oversight of their transactions. However, I believe it is important to balance this with maintaining the independence of the Federal Reserve. Banks borrow from the Federal Reserve with the belief that their specific transactions will remain private so as not to trigger public speculation on the standing of their company. Such speculation could significantly tighten access to credit for the banks and their depositors, or even lead to a bank run. While I support a public audit in concept, I am concerned it could turn these unintended possibilities into a reality. As a result, I cannot support H.R. 1207 in its current form.

H.R. 1207 was referred to the House Committee on Financial Services, of which I am a member. Barney Frank, Chairman of the Financial Services Committee, has indicated the committee will soon hold a hearing on the independence of the Federal Reserve, and I expect H.R. 1207 to come up in discussion. I look forward to hearing testimony and learning more about this issue.

Thank you again for contacting me to express your concerns and allowing me to explain my views. Please feel free to contact my office in the future with other issues of importance to you.

Sincerely,

Michael E. Capuano
Member of Congress