The Merits of HR 1207 (Audit the Fed)

A blast-out email I received this morning from Rep. Alan Grayson (D-Fl) confirmed that HR 1207 - the "Audit the Fed" bill - has gained significant traction in the House of Representatives, having gained over 290 co-sponsors. In anticipation of tomorrow morning's debate concerning HR 1207, to be heard before the House Financial Services Committee, I'd like to briefly share the fundamental reasoning which underlies my support of this bill.

First and foremost, I am a pragmatic libertarian; i.e. I understand that certain externalities are bound to occur when the universe of private transactions are allowed to take place in complete absence of regulation. In other words, I agree with preventing one man from polluting his own land (private property) if that pollution can flow down the river to another man's property. Similarly, I am of the opinion that the global financial system has grown sufficiently complex to warrant the existence of the Federal Reserve. True, the founders of this nation did not establish anything resembling a central bank. However, these men could never have envisioned the current scenario, whereby the dollar serves as the world's reserve currency, let alone that a financial instrument such as a "collateralized debt obligation" would even exist.

Having established the Federal Reserve's right to exist, I think we need to seriously consider the question: Under what conditions will the Federal Reserve be allowed to exist? Certainly, I see nothing wrong with a Federal Reserve capable of intervening during times of acute stress in the financial markets. However, accompanying this incredible power should be at least some modicum of transparency. To use a popular cliche, "Sunlight is the strongest disinfectant". This concept of transparency is the ultimate equalizer in a democratic society; conversely, a lack of transparency by the Government is the most necessary element of tyranny.

Some may argue that to audit the Federal Reserve is to deprive it of the independence necessary to conduct it's job. That argument might be relevant in the event that HR 1207 proposed some sort of Congressional oversight of the Fed. However, audit does not equal oversight or interference. The Supreme Court is an independent branch of the federal government that rules on the constitutionality of federal law. Members of Congress do not influence Supreme Court rulings; however, at the end of the day, the public is allowed to read a majority opinion stating the Court's reasoning behind the decision. Why is there no similar measure of transparency at the Fed?

Finally, the primary problem with the current state of the Federal Reserve is that this board of unelected officials is arguably more powerful than the President of the United States. At least show us how you are choosing to exercise that power. Sphere: Related Content