What Would a Federal Reserve Audit Show?

WSJ explains:

The GAO’s oversight of the Fed system is limited to areas outside of monetary policy. That includes everything from bank supervision to consumer issues to payment systems. The Fed’s annual report covering the calendar year 2008 listed seven completed GAO reports and eight projects underway. Fed Vice Chairman Donald Kohn testified this summer that the GAO, as of June 29, had 19 projects underway involving the Fed, including 14 launched at the request of Congress.

The GAO can’t review most of the Fed’s monetary policy actions or decisions, including discount window lending (direct loans to financial institutions), open-market operations and any other transactions made under the direction of the Federal Open Market Committee. It also can’t look into the Fed’s transactions with foreign governments, foreign central banks and other international financing organizations. (The GAO in 1993 produced this report on its limitations. The Federal Banking Agency Audit Act of 1978 put other parts of the central bank’s operations under GAO purview, as they had been for a decade until 1933.)

The Federal Reserve Board’s Office of Inspector General retains an outside auditor — a private accounting firm — to review the Board’s financial statements and compliance with laws affecting those statements. Deloitte & Touche LLP served as the outside auditor of the Fed Board in 2007 and 2008. The Board selects outside auditors to audit the 12 regional reserve banks.

H.R.1207, called the Federal Reserve Transparency Act of 2009, simply directs the Comptroller General (who heads the GAO) to complete an audit of the Federal Reserve system — the Board and reserve banks — before the end of 2010 and report his findings to Congress.

Mr. Paul, in an interview, said he expects the audit to detail who the Fed lends to, how much it lends and what agreements it has made with foreign central banks and financing organizations. While the bill only seeks a one-time audit, he said he wants the Fed to be audited at least annually with the report — and details of its transactions — disclosed publicly.

And Paul starts battling the diluting and takeover of the bill by Big government advocates. WSJ again:

The bill has attracted 282 House lawmakers as co-sponsors, or almost two-thirds of the chamber. It’s expected to receive a vote in some form by October. Mr. Paul said in the interview that Mr. Frank, the Financial Services Committee chairman, is leaning toward incorporating the provision into broader legislation overhauling financial regulation. But, Mr. Paul added, “when you have that many cosponsors, there might be an opportunity to actually bring it straight to the floor.”

A companion measure in the Senate, S.604, is called the Federal Reserve Sunshine Act of 2009 and includes language nearly identical to the House version. The bill, written by Sen. Bernard Sanders of Vermont, has 23 co-sponsors.