An unlikely alliance of liberals and conservatives led by socialist Sen. Bernie Sanders and firebrand conservative Sen. Jim DeMint is gaining ground in an effort to audit the Federal Reserve, despite objections by the White House and bank lobbyists.
The provision is “absolutely certain” to get a vote on the Senate floor, Sanders said Tuesday. Sanders said Majority Leader Harry Reid is pushing for his amendment to be subject to a 50-vote majority, rather than a 60-vote super-majority, but that Republicans haven’t agreed to that.
A stand-alone bill, like Sanders’s amendment to financial reform legislation, that would remove restrictions on the Government Accountability Office (GAO) to audit the Fed, has 32 cosponsors in addition to Sanders. Two-thirds are Republicans.
Obama has dispatched chief of staff Rahm Emanuel and Federal Reserve Chairman Ben Bernanke, originally a Bush appointee, to stop the amendment.
Sanders slammed the administration for opposing the amendment. “Good question!” he responded when asked how White House opposition to the amendment squares with Obama’s transparency pledges. Sanders said he and Emanuel haven’t spoken about the issue.
Sanders is increasingly optimistic about the amendment’s chances even in spite of White House opposition, he said. A key committee chairman, Sen. Chris Dodd, Connecticut Democrat, isn’t wholly opposed to the amendment, Sanders said. “I think he is not unsympathetic for what we’re trying to do. He may have concerns,” Sanders said, adding that the two were involved in ongoing discussions on the matter.
Proponents for an audit argue the Federal Reserve has expanded its role during the financial crisis without any additional oversight. They say the public has a right to know to whom the Fed is lending trillions of taxpayer dollars.
“Since the start of the financial crisis, the Federal Reserve has dramatically changed its operating procedures. Instead of simply setting interest rates to influence macroeconomic conditions, it rapidly acquired a wide variety of private assets and extended massive secret bailouts to major financial institutions,” a recent letter from top union officials said.
Opponents say the information unveiled by a GAO audit could roil the financial markets when firms that received government liquidity were revealed, making them look weak. Disclosing recipients could make others less likely to take government aid even if they need it. And economists say the Fed’s independence is crucial to its credibility in the market, and it could be undermined by additional congressional oversight.
A recent Congressional Research Service (CRS) report notes that one historical example “supporting the Fed’s argument” is during the Great Depression, when bank runs resulted from disclosure about which banks received loans from the Reconstruction Finance Corporation.
The CRS report notes that disclosures about loans given during the current bailouts under Troubled Asset Relief Program have not resulted in such dire consequences. Still, “participants have expressed concern that if they did not repay soon, investors would perceive them as weak,” the CRS report says.
Lining up behind the audit amendment are a diverse group of conservative and liberal interest groups.
Arch conservative anti-tax groups National Taxpayers Union and Americans for Tax Reform are supporting the amendment. FreedomWorks, which has organized several Tea Party rallies, is also behind it.
Top unions AFL-CIO and SEIU are backing it as well. Liberal activist group MoveOn.org has registered its support. The AARP is supporting the measure.
The House included the Fed audit in its version of the financial reform legislation, which it passed in December. Reports indicate the audit’s opponents are hoping keeping it out of the Senate bill will make it easier to quash when the two chambers negotiate the differences between their respective bills.
Sanders said a vote on the amendment could come as early as Wednesday.