Thursday, June 28, 2012

Congressional panel clears way for Fed audit bill

A U.S. House of Representatives panel on Wednesday approved a measure that would allow an audit of the Federal Reserve’s monetary policy decisions, a level of scrutiny the central bank says would compromise its independence.

The measure was proposed by Republican Representative Ron Paul, a long-time critic of the central bank, and has 257 co-sponsors, more than half of all House members.

Its approval by the House Oversight Committee clears the way for a vote in the full House. House Majority Leader Eric Cantor said last month the House would vote on the legislation in July.

“The Fed’s balance sheet now stands at nearly $3 trillion. It is long past time for a real audit,” said Oversight Committee Chairman Darrell Issa.

The central bank’s balance sheet has ballooned to about $2.8 trillion from around $800 billion before the 2007-2009 financial crisis as the central bank bought Treasury securities and mortgage-related debt to drive borrowing costs lower and boost economic growth.

Similar legislation was approved by the House in 2010 but was watered down in the broad Dodd-Frank financial reform legislation approved in July of that year.

Ron Paul’s son Senator Rand Paul has introduced a companion bill in the 100-member Senate that has 20 co-sponsors.

The central bank, the nation’s lender of last resort, has come under bipartisan criticism for its role in bank bailouts and its unconventional efforts to support the weak economy.

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