Bartlett: 'Audit the Fed' Is a Crackpot Idea

Writes Bruce Bartlett:

Ron Paul finally got his wish yesterday and the House Financial Services Committee held a hearing on his legislation to audit the Federal Reserve. There were only two witnesses: the Fed's general counsel and Tom Woods, a historian from the Ludwig von Mises Institute...

I urge those curious about this issue to read both statements. I think it is abundantly clear that this is a crackpot idea. The Fed is already thoroughly audited in every area except two: monetary policy and dealings with foreign central banks. The only purpose of having additional audits of the Fed is to undermine its independence precisely with regard to these two areas. If Woods presents the best argument for doing so, the argument is very shallow indeed.

Reading only the prepared statements of Fed General Counsel Alavrez and Dr. Woods is is like reading only the introduction of a book and then critiquing the book. From Bartlett's comments, he clearly has not viewed the entire testimony.

For one, Ron Paul in his opening remarks, as I reported, knocked down the idea that H.R. 1207 is about auditing Fed monetary policy. It is not. Only Federal Reserve apologists continue to build this strawman.

Secondly, the questionning of Alvarez by Representative Alan Grayson should be enough to realize that an audit is necessary. Alvarez was evasive when Grayson quizzed him about Federal Reserve manipulation of the stock market. Alvarez also claimed he had no knowledge of front running by those who have inside information of Fed trading activities, when rumors about such trading are plentiful in the bond pits. Thus, while Bartlett attempts to focus on the strawman of auditing monetary policy, Grayson showed us two areas where a Fed audit is long over due---the area of front running the Fed, and any trading activities by the Fed in the stock market and stock futures markets. Further, an audit needs to be undertaken to determine what assets the Fed is buying. Alvarez, in testimony, attempted to deflect questonning by stating that the large majority of purchases are Treasury securities, but what the public should know is what else the Fed is buying.

Bartlett does acknowledge that Paul's bill would result in an audit of Fed activities with foreign entities, but does so grudgingly and misstates it as only an audit of foreign central banks, when, in fact, it would include an audit of Fed activities with foreign central banks, foreign governments and any other foreign entities the Fed trades with. As Representative Grayson put it, if there is a foreign savings bank called the Dick Cheney Savings Bank which has only a foreign account and the Fed is buying assets from the bank, shouldn't we know about this?

Why Bartlett, or anyone else, wouldn't want an audit of Fed transactions being done with foreign entities, is a real head scratcher.

I wonder if Bartlett would argue for giving Bernie Madoff a pass if he only ran his Ponzi scheme using foreign banks. Would it be a crackpot idea to audit Bernies foreign accounts? Using Bartlett logic it would be nuts to audit them.