Home > 2014 SD Legislative Session, South Dakota > SD HCR 1007: Audit the Fed resolution passes the House

SD HCR 1007: Audit the Fed resolution passes the House

January 28, 2014

johnny_automatic_bag_of_moneyToday South Dakota House Concurrent Resolution 1007 came the floor for debate and a vote. This concurrent resolution would petition Congress to provide for an audit of the Federal Reserve Bank. I posted on this bill previously in support of it. HCR 1007 passed with a vote of 43-25. This particular resolution got more attention on the floor than I thought it would. That is great, it means more people are thinking about whether The Fed should be audited.

Rep Kaiser (R-3) brought the bill to the floor. I thought he did a pretty good job of explaining why a private bank that is in charge of monetary policy for the United States should be audited.

Leading the opposition was Rep Ring (D-17). It is not surprising he would speak up on this bill. As a retired economics professor he is definitely a subject-matter expert. Unfortunately most of his opposing testimony revolved around Keynesian economic theories that are treated as ‘truths’ by too many economists. I would actually love to discuss the topic with Rep Ring someday. I do respect the fact he came with his opinion on this concurrent resolution (even if I disagree with his arguments).

But it wasn’t his use of economic theories that troubled me about his opposing testimony. Instead I was kind of disheartened by an economist saying the Federal Reserve doesn’t need to be audited more. Rep Ring mentioned The Fed is one of the most highly audited bodies already. That is true, but that doesn’t tell the whole story. The only parts of The Fed that are audited are those which The Fed itself has not exempted from audits. There are large portions of The Fed that have been protected from audits by exemption. These areas as laid out in 31 U.S. CODE § 714 include:

  1. transactions for or with a foreign central bank, government of a foreign country, or nonprivate international financing organization; (foreign version of The Fed)
  2. deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations
  3. transactions made under the direction of the Federal Open Market Committee
  4. a part of a discussion or communication among or between members of the Board and officers and employees of the Federal Reserve System related to clauses (1)–(3) of this subsection

If you read this closely it basically allows the Federal Reserve to choose what areas of itself can be audited. Almost anything the Federal Reserve does could be twisted to fall within the second or third subsection. I’ve debated these exemptions with others before. My opponents in this debate usually seem to believe these exemption are nothing but important tools for The Fed to do things such as raise employment. The reasoning goes further to try making the case that only the end results are important for transparency. I disagree. I believe the whole process used within the Fed should be open for scrutiny. This isn’t even a case of ‘the ends justify the means’ because the Fed gets to decide which ‘means’ they will tell Congress and citizens of the United States about.

Another opponent was Rep Gibson (D-22). Gibson seemed to believe the Fed was not important to be audited because the EB-5 program hasn’t been truly audited yet? I agree the EB-5 program also needs true forensic audits done. But it doesn’t make sense to push for one audit and then say another is unnecessary? It should be transparency all around.

In the end this concurrent resolution passed in the House. I am glad Rep Kaiser took the initiative to sponsor and gain support for the bill. Hopefully this bill can be used as a tool to show our Congressional delegation an audit of The Fed is long overdue.

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  1. February 7, 2014 at 7:14 pm
  2. February 20, 2014 at 9:06 pm
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