Will a GOP-Led Congress Finally Audit the Fed?

While former-Rep. Ron Paul’s
showdowns with Ben Bernanke recede into yesteryear, his calls
to “Audit the Fed” may once again reverberate through the halls of
Congress.

Republicans are increasingly
likely to take back the Senate today, which could
put congressional focus back on the Federal Reserve’s

shadowy shenanigans, The Wall
Street Journal claims:

Financial executives say a GOP-led Senate would ratchet up
congressional scrutiny of the central bank’s interest-rate policies
as well as its regulatory duties as overseer of the nation’s
largest financial firms.

“If the Republicans take control of the Senate and thus have
control of both the House and the Senate—two words for the Federal
Reserve: Watch out,” said Camden Fine, president of the Independent
Community Bankers of America.

Fed Chairwoman Janet Yellen may have put the (perhaps
temporary) kibosh on quantitative easing, but that’s not enough
for critics of the central bank:

Many Republicans want Fed officials to move quickly now to raise
interest rates from near zero and shrink the central bank’s balance
sheet, which has climbed to near $4.5 trillion.

Scrutiny of the Fed’s monetary policies and regulatory
activities has sometimes been a bipartisan affair. This past year,
the chairman of the House Financial Services Committee, Rep. Jeb
Hensarling (R-Tex.), held 11 hearings looking into the Fed’s
activities. In a few weeks, Sen. Sherrod Brown (D-Ohio) will

preside over a Senate Banking Subcommittee on Financial
Institutions and Consumer Protection hearing on an unsettling
report of impropriety in the relationship between the Fed and
Goldman Sachs. And the Federal Reserve
Transparency Act passed in the House of Representatives
with overwhelming bipartisan support back in September. But for
reasons unknown, Senate Majority Leader Harry Reid (D-Nev.) has
kept this latest “Audit the Fed” proposal off the floor.

Perhaps the fed audit legislation put forward by Sen. Rand Paul
(R-Ky.) will have more luck after today. That bill has support from
other Senate Republicans, including Sen. Mitch McConnell (R-Ky.),
who will probably become Senate majority leader if the GOP wins the
chamber—and if McConnell wins his own re-election.

Even if no legislation actually passes, the heightened attention
on the Fed’s activities could still be beneficial:

A slate of hostile congressional hearings questioning the Fed’s
every move and movement of legislation would…force the Fed to
play more defense.

For their part, Fed officials oppose congressional audits and
other external meddling in their affairs, arguing that the bank’s
political independence is actually a feature and not a bug. In her
confirmation hearings Yellen said, “I would be very concerned about
legislation that would subject the Federal Reserve to short-term
political pressures that could interfere with that
independence.”

In any event, we’ll soon find out whether the GOP is doing more
than its usual
blustering at fiscal irresponsibility.