H.R. 1207 Audit the Fed Update

Just an update for those who have not been following this quite involved power struggle and may not know: House Financial Services Committee Chairman Barney Frank recently agreed to hold hearings on H.R. 1207, Congressman Ron Paul`s bill to audit the Federal Reserve. The hearings have just commenced and are now available on CSPAN and various other sites over the Internet.

For the record H.R. 1207 if it passes, (this is only a hearing) will open up the Fed`s funding facilities, such as the Primary Dealer Credit Facility, Term Securities Lending Facility, and Term Asset-Backed Securities Lending Facility to Congressional oversight and an audit by the non-partisan Government Accountability Office. Additionally, audits could include discount window operations, open market operations, and agreements with foreign central banks, such as ongoing dollar swap operations with European central banks.

Here is a small excerpt of Alan Grayson grilling the Feds appointed attorney. He shoots from the hips that's for sure.

Don't know too much about it but a questions:
- How does this affect independence of the Central Bank from the political side of Government? Because that is paramount to me. If this is simply about an audit for understanding and maintains the inability of the legislature to direct the central bank then that's great.


Transparent Govt is all good, so long as it doesn't encourage political interference with a central bank. On the whole I would suspect Paul to be entirely against political interference of that kind, but you'd have to make sure that in his desire to see the removal of central banking that he isn't ending up with an even worst half-way point.

Um G-Dub? How can you argue that independence is paramount after all we have just witnessed? Was Greenspan complying with Bush's policies in 2001 and lowering the interest rate to 1% acting with independence?

If you follow Austrian economics, there is no need for a central institution to even have an interest rate setting mechanism, let alone a discount window? And this is not even questioning the CPI being manipulated with hedonics and geometric pricing et al.

If you want to follow Austrian rules then get rid of the Fed altogether. If you are going to have a central bank then it must be immune from political whim with clear and defined targets.

Correct so why did it break the Taylor Rule then Gdub?

Fuck knows man - I totally agree that Greenspan drove the bubble and basically incentivised the GFC.

So you know this and yet you are concerned about 'transparency' interfering with the Fed's ability to remain independent, despite Greenspan breaking the Taylor Rule et al.?

Let us consider any number of the other areas of potential conflict we could discuss. Right now, the CEO of JP Morgan, Jamie Dimon, serves on the Board of Directors of the New York Federal Reserve Bank, as did Goldman Sachs Director Stephen Friedman.

This creates striking conflicts of interest and unseemly appearances in the management of what is ultimately the American public’s money.



Do you think any of these reasons demand an audit?

If I seem short it is not because I am trying to patronize you, it's because I'm 'pissed off' with what has happened and your argument is exactly what the Fed is trying to use to weasel it's way out of this situation.

Look at the power struggle going on at the moment, it's fighting back tooth and nail:

1. Federal Reserve loses suit demanding transparency: http://www.reuters.com/article/ousiv/idUSTRE57O03P20090825

2. Fed urges secrecy on banks in bailout programs: http://www.reuters.com/article/idUSTRE57Q46920090827

You aren't seriously asking me why a Central Bank needs independence from political interference are you? It's the absolute cornerstone? You're an economist right?

The Fed may need governance improvement, and as I said at the beginning if the audit is about understanding and therefore to ensure governance laws are appropriate then fine. But that in no way at all allows for political management of a central bank. You think the Fed caused boom bust problems - just wait until a populist Congress is put in charge of it!

An audit to ensure the controls and governance are in place is definitely a good thing. I agree.

No, I'm implying that if you think the Fed has been acting with independence, you are in fact deluding yourself. I also think it's strange that you would 'toe the party line' and raise concern over an audit after everything we have just witnessed.

I am gob smacked. Literally.

Not to mention, a central bank doesn’t necessarily require complete independence, look at how our central bank functions for instance? It’s a strange argument.



A populist congress will not be in charge of it. It's simply the ability to audit its books for all the things that mater.

um, I believe he works in an IT support role.

um, I suggest that you actually read what g-dub wrote before you get your rant on...

You mean the job at the bank I quit? enrolling at University, performing a double major in Econ and Political Science.

I read what he said AND I am still gob smacked that he is concerned about the Fed loosing it's independence. Where was this concern when the Fed abolished reserve requirement ratios and stopped publishing M3? Nope, he now raises concern about a Fed audit after the most reckless monetary policy in history?

Why oh why won't somebody 'PLEASE' think about the FED's independence?

Applicable Analogy...

enrolled in uni?

excellent

hopefully I'll get to see an increase in the quality of your posting.

Already started. A+ standard so far bud.

Kill me now, before it's too late.

Rival mate, I didn't raise anything? This is YOUR topic!
That I agreed with, but sauid so long as it maintained political independence.

Cool, like I said, I'm happy for that to happen. Although once you've audited and found something Congress doesn't like, what will they do?
Use it to lock down governance rules I suppose? Which is all good.

I'm a little surprised that you're "gobsmacked" that someone supports transparency and an audit, but warns against political control of a central bank. Given you're current academic path, I would suggest you've come across exactly that statement a thousand times.

Yeah exactly, the one major place where there should be regulation. Instead they focus on the market, hurting the economy?

Just a follow up for those interested, to me this represents one of the most fascinating moments in political history. For not only is one of the worlds most secretive and powerful institutions in the spotlight, but we are witnessing a welcome coalition forming between the far Libertarian Right and some of the more Liberal/Progressive Left. E.G. Alan Grayson, Dennis Kucinich on the left and Ron Paul on the far right. They are actually helping each other despite their political differences in ideology. Also interesting are the Federal Reserve Banks private beneficiaries, who are rushing to buy up media outlets while a wide scale omission of this event continues from the media.

Does anyone find that interesting?

Not only this but Obama is going to grant the Fed even more power after all the harm it has just caused? But I suppose that it's hardly surprising when you look at where the groups of individuals come from, which financed his election campaign.


Some News Articles worth Reading:

Obama's Top 10 Contributors: http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00009638

Goldman Sachs And JPM Do A Stealthy Roll Up Of The Media Industry: http://www.zerohedge.com/article/curious-snag-debt-equity-restructurings-goldman-and-jpm-do-stealthy-roll-media-industry

A new article I have just received today, which gives you some background and indicates that over 90% of Americans polled support an audit of the Fed with now almost 300 cosponsors in the House: http://www.orlandosentinel.com/news/politics/orl-grayson-targets-fed-092509,0,5177529.story

are you at UoA?

Why is that, you want to do some investigation on me through your contacts?

No, just because many years ago I was a bright eyed young libertarian doing econ and politics at UoA, and it turned me into a socialist...

Wondering if it's gonna do the same to you...

Well if you are taking a tally consider these two aspects:

1. Knowledge attained so far from ECON110: One of Libertarianisms biggest problems is 'negative externalities' in the market, which can correct themselves providing there are no transaction costs. This is in keeping with Coase Theorem. However when there are transaction costs, it is likely that negative externalities will not be resolved. I believe the answer resides in subsidiarity however.

2. Knowledge attained so far from POLS108: Plato, Aristotle and I assume Socrates (not much is known about him other than his method) were all fairly critical of democracy. Aristotle not so much, yet he espouses some very libertarian arguments without many people even realizing it. Democracy really is a tyranny of the majority, without a Bill of Rights it's vile.

Make from that what you will...

Totally agree. Though I question whether a Bill of Rights adequately redresses the tyranny, and whether it is a suitable instrument for that purpose at all.

It's been a while. I hope you are well.

And as per your statement, I too am skeptical a bill of rights is sufficient. Look at America for instance, their constitution has been bastardized through democracy despite a bill of rights.

Democracy also leads to corporatism, where corporatism equals the collusion of government big business and labour unions. It's inevitable and very ugly.

Addition: Add church activities in government, into the corporatism definition.

Muse didn't refer to it as 'demonocracy' for nothing :>

And you are right, US (especially post 9/11) is an example of an entrenched Bill of Rights completely failing to protect rights not only of the minority oppressed by the majority, but also the rights of all American citizens.

On a side note, I recently saw an interesting exchange between a reporter and some guest economist on the US healthcare debate, where the economist was insisting that the marketplace can provide adequate quality control on healthcare providers (as opposed to the alternative of having the government regulate them). I'd be interested in your thougts on this (and I apologize if this has already been discussed elsewhere, I have not really followed biggie of late). Would you agree with the view of the economist? Does the market provide adequate quality control on something as vital as healthcare?

I believe the market could provide superior health care in a large market (economy of scale) the size of America, it would take some time (possibly 15 years or more) for the market to recover from all the government interference though. This is an estimate.

Also contrary to what many people believe America does not have a free market health care system.

A couple of articles worth reading for you on American health care:

1: http://mises.org/story/3727
2: http://www.latimes.com/news/nationworld/nation/healthcare/la-oew-cannon-mcneely16-2009sep16,0,1662405.story

i read threads like this (coz I have an interest in economics and markets) but I kind of dont know what to say about them because its all so much detail that I cant be bothered with. And then I realise why I dont care!
Its because although obviously politics and govt can huff and puff and expand their chest and print money , ultimately I dont think they are in control. I've never really thought that an OCR or a Fed rate determines where interest levels are. If I have money only I can determine who, and for what I will lend it to. The government cant (well not usually) control that.

Society and its mood drives the climate.
I dont generally believe in market manipulation either, although obviously a big enough player (such as a govt) can have strong influence.

Not sure if I am even on topic tho....

I like where you are going though Peat.

One thing that I do think is important, is that a central bank forcing down interest rates does cause coordination problems through the economy. It will not capture everyone in it's wave, as you imply, but what matters more is the percentage of people that it does capture. Whether it will eventuate into a boom/bust cycle depends various other factors, such as how much credit is created, how many people become tick up debt, how many investors are mislead, amongst others.

This is worth watching, I love Thomas Woods synopsis of Austrian Business Cycle Theory:

so i watched three , gonna finish the rest today



here is a real Lecture happening soon

How to stop the money men from taking over the world (or, when will we face another September 200?
Robert Wade, Professor of Political Economy, London School of Economics.
28 October 2009
6.30pm
Venue: Maidment Theatre, 8 Alfred Street

Could you explain to me in practical terms how an unemployed person with serious medical problems (bought on by their poverty) would have access to private medical insurance they could afford under a fully private model?

If we assume this is America, how is the person unemployed? Are we to suppose they grew up isolated? Where is their family, friends, neighbors, church, local state government?

Nope, they just appear in poverty out of a vacuum?

In a free market the size of America, just like any other good or service, clothes, cars et al. there will be competition and the price will come down. This is a given. Also if the Fed stepped out of the way and actually let deflation take place, this would be exuberated.

It would become affordable to most, I fail to see why health care is special and doesn't follow the rules of supply and demand?

Another update on topic.


Federal Reserve Appeals Court Order to Disclose Loans

http://www.bloomberg.com/apps/news?pid=20601087&sid=aSab0xkcV8jc

OK thanks, so the answer is - it doesn't. Someone who is poor can not afford basic healthcare. It's more efficient for those who can, but if you don't have the money, you will get sick and die.

Wait, I see the details of what they did and suppose that actually is monetary policy.
Still.

More efficient and affordable, but sure if you don't have the money and you get sick, and no one around you is charitable enough to assist you, you could get sick and die.

I think you would like Alan Grayson (who is in the video of this thread) he seems like the only Democrat with a spine, and expresses a similar sentiment. I.e. That the republican solution to the health care problem equates to: 1) Don't get sick, and if you do get sick 2) Die quickly.

And hey, points to you for being upfront about it - at least you've said "receiving medical treatment for common medical stuff is like owning a car - if you can't afford it you don't get it".
I can't agree with that from a social perspective but so many advocates for a pure private health system only discuss the "improvement on average" which almost certainly includes themselves - and avoid the fact that there are people that won't fall into the average and lose out.

Off topic but Alan Grayson on Health Care

This is Ron Paul's position on health care, which is more a question of 'rights', defined and far more important within a Constitutional Republic.

I'm happy to steal your productive capacity when I need it and I'm happy for you to steal mine when you do

I think it's called the social contract

Peculiar concept I know but it has stood us in good stead

Some people are not though, especially when it infringes on the rights of others.

all sorts of things impinge on "the rights of others" (whatever that may mean) but we tolerate them for the greater good - in the case of health budgets and the taxing regimen for them, the prospect that you or I or our children will have need of it at some uncertain time in the future and not face the grim ordeal of an undignified exit as so many people apparently do in the so-called land of the free

freedom from want as neil would point out to you is a fundamental freedom before all else

lol and nightrider and I agreeing.

Such as? I think you will find that a right to a car, a right to food, a right to property et al. are not actually rights. America is a constitutional republic not a liberal democracy (it is an elaboration on the old Roman model) people in New Zealand need to stop applying their cultural values onto America. It's their country not ours and look I understand your argument, but what I am saying is that in America, they do have certain inscribed 'rights' and health care is not one of those 'rights' it is a service.

No mater how you rationalize it, it involves transferring wealth from one person to another. It's not also just about 'rights' it's about the government needing to increase the deficit in order to afford it.

I think this video is a better demonstration of the arguments.

Why don't you contribute something rather than trying to play 'pack tactics' (the socialist way) from the sideline? "LOL I AGREE WITH NR"

Well I do and I don't at the same time. Does this mean it all cancels out?

y so srs!

I just thought it was funny that NR and I agree because we usually don't...


I'm sorry if that's playing socialist pack tactics?!? That's just something you're gonna have to work through in your own paranoid schizophrenic brain....

rightyO

Geez mate, you sure know how to undo any half-way rational discussion you were having in this thread.

Gee I wonder if it has anything to do with being overly sensitive due to the way I have been treated on here over the years?

You don't think that has anything to do with it?

I'm not saying those examples you mention are. By deed of social and political arrangement constitutionally enshrined in law the Americans continue to negotiate and navigate their way around the interpretations to the various charters and amendments to the constitution, the right to take your life for taking anoither's, unlawfully, being one of them.

As to property rights are you for real? this would have to be one of their most cherished cultural, political and economic beliefs. Witness the intellectual property rights polemic/ debate.

As to their not being a liberal democracy it is America which preaches cemocracy to everyone else. The liberal side of it is not to be interpreted in the perverted debased way that so many American bigots do. It should be seen as the pluralistic and free that it means, many united under one.

I know Ron Paul is in favour of descaling their military adventures but it is their military budgets that are the real scandal and have been for many decades. If a fraction of that money were earmarked for health care they would be the real envy of the world and not the factional basket-case they are at present and deficits would not be an issue. Militarism is neiother a service nor a right to be imposed but try telling them that.

Yes I am being real I'm just not sure you are interpreting me correctly and your statement is actually reiterating what I am attempting to convey, is that to provide health care, involves infringing on property rights. It is performed via "income tax" (which is allegedly voluntary but isn't) and is also unconstitutional and is something Ron Paul will abolish.



Yes and I too find this ridiculous but it is the Neo Conservatives and various Democrats which are to blame for this misconception.



To understand where it all falls down, you need to examine the difference between a Republic and Democracy and also take into context what the founding fathers were attempting to create. If many peoples votes can override rights, then it is unconstitutional by definition, unless of course the rights are changed or the applicable articles are repealed.

I am studying the US Constitution at the moment as a side project, very interesting thing to look at and yes parts are debatable and not everyone agrees with it.



I completely agree with this, and it should be noted that just because I defend or attempt to translate the opposing arguments as accurately as I can, this does not mean I am for or against what you say here. Especially with this comment.



Them and us is problematic and it is not all of them NR. Also people are, re Ron Paul who is against the draft.

^Just to make a correction here, it is actually constitutional for Congress to lay taxes. Such as can bee quoted here:


However Ron Paul does want it repealed and there is something problematic about what can actually be taxed I am fairly sure. I will see if I can dig it up.

Yes what is contested has to do with the 16th Amendment and how property rights are defined. I think it's interesting to note that both the Federal Reserve (which Ron Paul et al. also contest) and the 16th Amendment to the US Constitution (Income Tax) were both ratified in 1913.

health care = general welfare??

I would have thought so.

always a question of how far it goes of course...

but the point being that the constitution makes allowance for (in that Ron Paul Speak) to steal off some to provide for others.

General welfare can be interpreted as health care, although I don't actually think that's what Jefferson, Madison, Washington et al. were intending at the time.

And yes, it comes down to how one defines property too, is income property so taxation becomes theft? The right to life, liberty and the pursuit of happiness. What is liberty? etc.

Even if people disagree with Ron Paul et al. in this particular instance (which many New Zealander's do) at least people can understand, where the disputes reside.

A lot of conflict comes down to definitions.

Back on topic for those interested:



Highlights of the Audit The Fed Bill Hearings (H.R. 1207) - Part 1 of 6

Another update: Senators Jeff Merkley (D-OR) and Bob Corker (R-TN) have now introduced "The Federal Reserve Accountability Act," an attempt to kill HR 1207 and S 604 by passing a bill that prevents a full audit and full transparency from America's central bank.

http://www.campaignforliberty.com/blog.php?view=26719

what do you think of this Rival ??

I think its pretty appropriate to this thread.

http://blogs.ft.com/maverecon/2009/11/should-central-banks-be-quasi-fiscal-actors/#more-7561

None of the three central banks, the Fed, the ECB or the Bank of England have been willing to reveal how they value illiquid collateral. Requests to make public either the pricing models or the actual valuations of all illiquid private securities offered as collateral have been systematically stonewalled by the central banks. That makes it impossible for external assessors to determine whether an ex-ante subsidy was involved in the terms and conditions of the loans.

The Fed went well beyond even this. In its bail-out of AIG, it refused for a long time to reveal who the counterparties of AIG were that were made whole because of the Fed’s emergency loans to AIG. They were forced to reveal the information in the end, but this does not undo the earlier attempt to hide the identities of the beneficiaries of the Fed’s and the US Treasury’s largesse

That was a very technical article/blog to consider, this guy has a huge knowledge, potent enough in my opinion to rival Milton Friedmans. Anyway sorry for the slow response, but I must say I agree with him, and this entire notion that the Fed is independent is spurios at best?!? Consider the following: most Golden Sach's alumnus end up either running the Treasury or on the board of governors at the Fed. So upon observing this: we are somehow expected to believe, upon these indivudals (and there have been a few) joining such institutions, suddenly any bias, collaboration, or conflict of interest is immediately negated?

Or how about the fact, the President of the United States approves the Fed chairman, and that somehow this isn't going to be translated at all, into approving a chairman who will cater for monetary management that best serves his political interests? Then there is the entire issue of the Fed arguing that it's monetary policy will be jeprodized if it is allowed to be audited, as if this meltdown alone doesn't imply that it's policy wasn't already jeprodized back in 2001 is enough? it has now (as your article suggests) surpassed it's monetary jurisdiction and the line has become blurred.

However in the Feds favour it should be noted pure fiscal actions, which entail changes only in Government expenditure and tax programs, are rare; most stabilization actions involve a mixture of (1) fiscal (tax-financed Government spending), (2) monetary (Federal Reserve actions) and (3) debt management (changes in the maturity or value of the debt) policies. For example, the offering of Treasury bonds to finance a deficit constitutes debt management policy (or fiscal policy, by more conventional definitions) at first, but the subsequent purchasing of such bonds (or perhaps the failure to purchase such bonds) by the Federal Reserve is generally construed to be monetary policy.

Thus the existence of Government bonds clouds the distinction between the two basic economic stabilization policies — monetaiy and fiscal. Is this relevant here when it comes to allocating money to private institutions as part of TARPS? I am not entirely sure. I guess they could argue one way or the other, which doesn't prevent me or many other American's for that mater, in demanding some kind of audit to see what's going on.

I'm a big fan of Thomas Woods from the Ludwig von Mises Institute actually, I would strongly recommend watching his speech on this entire notion of Fed independence.