Frank says Paul's Fed audit bill will pass House

By Amanda Carpenter
The Washington Times
Friday, August 28, 2009

http://www.washingtontimes.com/weblogs/back-story/2009/aug/28/barney-fra...

House Financial Services Chairman Rep. Barney Frank, Massachusetts Democrat, said he expects former Republican presidential candidate Ron Paul's legislation to audit the Fed to pass out of his committee in October as part of a larger regulatory package.

The bill proposed by Rep. Paul, Texas Republican, if added to Mr. Frank's other proposed reforms, could give a boost to a financial regulation package the Obama administration wanted to pass last spring. The Fed bill has 282 co-sponsors, including every Republican member of the House and a considerable number of Democrats. The Senate's lead sponsor of the bill is Sen. Bernard Sanders, a Vermont independent and self-described socialist.

Today the Government Accountability Office has no power to audit the Federal Reserve. Mr. Paul's bill would empower the government watchdog to do so and make its findings available to the public.

Mr. Frank was asked at a town hall meeting when he would put the bill up for a vote in committee, and after giving a lengthy explanation of current problems with the Federal Reserve Mr. Frank said he was working with Mr. Paul and that "this will probably pass in October."

Below is a transcript of Mr. Frank's remarks concerning the bill:

"I have been pushing for more openness from the Fed. I want to restrict the powers of the Federal Reserve. First of all, the Fed will be the major losers of power if we are successful, as I believe we will be, setting up a financial product protection commission. The Federal Reserve is now charged with protecting consumers. They were supposed to do subprime mortgage restrictions.

"Congress in 1994 gave the Fed powers to ban subprime mortgages. Alan Greenspan refused to do it. They had the power to ban credit card abuses. Under Greenspan they did nothing. Under Bernanke they started but only after Congress acted. That's one of the reasons why in the new consumer protection agency we will take away from the Federal Reserve the power to go consumer protection.

"Secondly, they have has since 1932 a right under Herbert Hoover to intervene in the economy whenever they could. Last September the Federal Reserve they were going to advance $82 billion to AIG. I was kind of surprised and said, 'Mr Bernanke, do you have $82 billion?' Mr. Bernanke replied, 'I have $800 billion and under Section 13.3 of the Federal Reserve Act they can lend anything they want.'

"We are going to curtail that lending power. We are going to put some restrictions on it.

"Finally we will subject them to a complete audit. I have been working with Ron Paul, who is the main sponsor of that bill. He agrees that we don't want to have the audit appear as if influences monetary policy as that would be inflationary.

"One of the things the audit will show you is what the Federal Reserve buys itself. And that will be made public, but not instantly because if it was made instantly people would be trading off it, so the data would be released after a time period of several months, enough time so it will not be market sensitive. This will probably pass in October."

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For video of Frank's comments:

http://www.washingtontimes.com/weblogs/back-story/2009/aug/28/barney-fra...