Audit the <i>New York </i>Fed
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
Could a political marriage of Rand Paul and Elizabeth Warren finally open up the question of the Federal Reserve? We ask because of the call this week by Senator Elizabeth Warren for hearings into the allegations aired on National Public Radio that the New York Fed has been treating the banks it supervises with kid gloves. Those allegations were the result of an investigation that NPR reported in league with another liberal news service, Propublica. It happens that Mrs. Warren’s call came but ten days after the House passed the Federal Transparency Act.
Known as Audit the Fed, the measure would subject the Fed and its regional banks to a real audit, one that includes not only their books but their formation of monetary policy and their full range of operations. It just passed the House by the astonishing, bi-partisan margin of 333 to 92, wider than the margin the last time it was passed. In other words, passage wasn’t just a tip of the hat as it was deemed to be two years ago to a departing Congressman Ron Paul, who was the originator of this demarche but has since left Congress. It turns out that the People’s House wants this measure.
Yet Reuters reports that the legislation “is expected to meet a fate similar to its predecessor’s: death in the Democratic-controlled Senate.” Could that be turned around? The entry of Mrs. Warren into this fray makes us wonder whether there might be some hope that — as happened in the House, where the measure originally had tough sledding — Democrats and Republicans could come together. Particularly since a logical partner on this measure would be Ron Paul’s son, Senator Rand Paul, who has had a companion measure to the House bill before the Senate for some time.
The gentlewoman from Massachusetts may be a socialist and the gentleman from Kentucky may be a libertarian. What that means is that they could make different uses of what would be turned up by a thorough audit of the Fed. Yet it strikes us at least they have a common interest in finding out what in Sam Hill is going on at the central banking system that the Congress created. The NPR/ProPublica report is shocking enough; it includes tape recordings made by a Federal Reserve bank examiner, Carmen Segarra, before she was fired by the Federal Bank of New York in 2012.
Ms. Segarra’s surreptitious tapes seem to have recorded examiners from the Fed being “captured” by — meaning, going soft on — Goldman Sachs in the course of their work review of the big investment bank. And they also show her being cashiered when she declines to be captured herself. We’re not so concerned one way or another whether the Fed has been captured by Goldman. The way to stop that racket is to end the era of fiat money and establish a constitutional system in which the dollar is defined as a set amount of specie, gold or silver.
That’s the way to keep the Fed honest. It’s the method to put some backbone in the New York Fed. It’s the way to put Goldman Sachs in a situation that can be supervised. For if the money is not connected to anything real, what at the end of the day are the examiners the Fed sends out supposed to examine? No less a figure than the greatest of the modern Fed chairmen, Paul Volcker, has called for a New Bretton Woods. The chairman of the Joint Economic Committee of the Congress has called for a centennial review of where the Fed stands at the start of its second century. An audit of the Fed would be just the place to start, beginning with an audit of the New York Fed.