Bring on Ron Paul's Audit of the Fed

by James Grant

The Federal Reserve's balance sheet is so out of whack that the central bank would be shut down if subjected to a conventional audit, Jim Grant, editor of Grant's Interest Rate Observer, told CNBC.

With $45 billion in capital and $2.1 trillion in assets, the central bank would not withstand the scrutiny normally afforded other institutions, Grant said in a live interview.

"If the Fed examiners were set upon the Fed's own documents – unlabeled documents – to pass judgment on the Fed's capacity to survive the difficulties it faces in credit, it would shut this institution down," he said. "The Fed is undercapitalized in a way that Citicorp is undercapitalized."

Grant said he would support legislation currently making its way through Congress calling for an audit of the Fed.

Jim Grant, editor of Grant's Interest Rate Observer, criticizes the performance of the Federal Reserve.

Moreover, he criticized the way the Fed has managed the financial crisis, saying the central bank's target rate should not be around zero.

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June 11, 2009