Tuesday, April 7, 2009
Ron Paul's Statement Introducing HR 1207 - The Federal Reserve Transparency Act of 2009
Madam Speaker, I rise to introduce the Federal Reserve Transparency Act. Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar. Since 1913 the dollar has lost over 95% of its purchasing power, aided and abetted by the Federal Reserve's loose monetary policy. How long will we as a Congress stand idly by while hard-working Americans see their savings eaten away by inflation? Only big-spending politicians and politically favored bankers benefit from inflation.
Serious discussion of proposals to oversee the Federal Reserve is long overdue. I have been a longtime proponent of more effective oversight and auditing of the Fed, but I was far from the first Congressman to advocate these types of proposals. Esteemed former members of the Banking Committee such as Chairmen Wright Patman and Henry B. Gonzales were outspoken critics of the Fed and its lack of transparency.
Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations. While the conventional excuse is that this is intended to reduce the Fed's susceptibility to political pressures, the reality is that the Fed acts as a foil for the government. Whenever you question the Fed about the strength of the dollar, they will refer you to the Treasury, and vice versa. The Federal Reserve has, on the one hand, many of the privileges of government agencies, while retaining benefits of private organizations, such as being insulated from Freedom of Information Act requests.
The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the GAO is prohibited from auditing or even seeing these agreements. Why should a government-established agency, whose police force has federal law enforcement powers, and whose notes have legal tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight? Particularly when hundreds of billions of dollars of currency swaps have been announced and implemented, the Fed's negotiations with the European Central Bank, the Bank of International Settlements, and other institutions should face increased scrutiny, most especially because of their significant effect on foreign policy. If the State Department were able to do this, it would be characterized as a rogue agency and brought to heel, and if a private individual did this he might face prosecution under the Logan Act, yet the Fed avoids both fates.
More importantly, the Fed's funding facilities and its agreements with the Treasury should be reviewed. The Treasury's supplementary financing accounts that fund Fed facilities allow the Treasury to funnel money to Wall Street without GAO or Congressional oversight. Additional funding facilities, such as the Primary Dealer Credit Facility and the Term Securities Lending Facility, allow the Fed to keep financial asset prices artificially inflated and subsidize poorly performing financial firms.
The Federal Reserve Transparency Act would eliminate restrictions on GAO audits of the Federal Reserve and open Fed operations to enhanced scrutiny. We hear officials constantly lauding the benefits of transparency and especially bemoaning the opacity of the Fed, its monetary policy, and its funding facilities. By opening all Fed operations to a GAO audit and calling for such an audit to be completed by the end of 2010, the Federal Reserve Transparency Act would achieve much-needed transparency of the Federal Reserve. I urge my colleagues to support this bill.
Wednesday, October 29, 2008
Tuesday, October 28, 2008
If you don't know our group was in the annual "Ghouls Gone Wild" Parade on Saturday October 25th. It was a smashing success. We handed out 1776 suckers with messages attached in less than half of the distance of the parade. I think I speak for all of the participants when I say, it was fun and effective. Which is a rare combination.
The crowd reaction was awesome! People are ready to hear our message.
Lots of pictures were taken of the group. The first pictures of our participation in the parade have appeared on the internet. The pictures taken by our group will be up as soon as possible.
PHOTO CREDITS: Event Logo, Oklahoma Gazette.Top Left, Social Pariah Photography. Top right, amy_b. Bottom, music for the eyes.
All photos are property of their respective owner(s). The use of these images are covered by "Fair use" (US CODE: Title 17107. Limitations on exclusive rights.)
The Treasury Department has hired two big accounting firms to help keep tabs on the government's financial-industry rescue program, and once again certain basic elements of the deals are shrouded in secrecy.
PricewaterhouseCoopers LLP will provide internal controls for the government's $700 billion bailout fund. Ernst & Young will provide general accounting and consulting. The Treasury Department said the first phase of the three-year contracts will be worth $191,469.27 and $492.006.95, respectively.
That sort of specific detail is lacking in the agreements themselves. The PricewaterhouseCoopers contract released by the Treasury Department on Tuesday has blacked-out text in the area covering the firm's bid, and also conceals the name of the PricewaterhouseCoopers partner who signed the deal.
Another section listing the names of the PricewaterhouseCoopers employees designated to work on the contract also is blacked out.
The Ernst & Young contract has no blacked-out sections, just notes saying that two parts of the agreement were redacted. Those were the firm's price quotation and technical quote.
The Treasury Department said it contacted 12 accounting firms about the contracts, and received six bids for each of the engagements.
BailoutSleuth believes that transparency is vital to the success of the taxpayer-funded bailout program. The $700 billion allocated for the Troubled Asset Relief Program translates to roughly $2,300 for every man, woman and child in America.
The contracts between the Treasury Department and PricewaterhouseCoopers and Ernst & Young have extensive language covering potential conflicts of interest. They include a provision allowing the firms to beg off certain assignments if they think the conflicts are too great.
PricewaterhouseCoopers and Ernst & Young have connections to at least two companies whose troubles helped ignite the financial crisis.
Ernst & Young was the auditor for Lehman Brothers Holdings Inc., which filed for bankruptcy on Sept. 15 after potential buyers walked away and federal officials declined to rescue the firm. Certain Lehman executives are the subject of at least three grand-jury investigations. According to news reports, Ernst & Young also has been subpoenaed as part of the probe.
After Lehman's collapse, Hong Kong's government hired Ernst & Young to assess the residual value of certain securities that had been guaranteed by Lehman and sold by Hong Kong banks.
PricewaterhouseCoopers became the administrator for Lehman Brothers International (Europe), the European branch of the investment company. It has been winding down that branch's operations and seeking buyers for its businesses and assets.
Both firms also worked for American International Group Inc., the big insurer that has been propped up by the Federal Reserve through more than $120 billion in funding, which essentially makes the government the company's biggest shareholder.
PricewaterhouseCoopers is AIG's longtime outside auditor. It put pressure on AIG earlier this year to change the way it valued certain securities tied mainly to sub-prime mortgage. In February, AIG said that PricewaterhouseCoopers had found a "material weakness'' in its accounting, and warned that it would have to write down the value of those investments by $4.88 billion.
Ernst & Young last year agreed to pay $1.6 million in penalties to settle Securities and Exchange Commission charges that it violated independent auditing standards in connection with work it did for AIG and PNC Financial Services Group Inc. in 2001.
Ernst & Young neither admitted nor denied guilt in the case, which involved a financial service developed by AIG that allowed companies to transfer volatile financial assets to so-called special purpose entities and remove them from their publicly reported financial statements.
According to the SEC, Ernst & Young helped AIG market the service. PNC was one of Ernst & Young's audit clients. PNC later was forced to restate or revise its financial results for the second, third and fourth quarters of 2001, as well as its results for the full year.
The SEC said PNC tried to hide some $760 million in troubled loans and other assets by shifting them into special purpose entities it created with AIG.
The SEC settled charges with AIG in 2004, as part of a deal that also resolved related criminal charges. AIG neither admitted nor denied guilt, but agreed to pay $126 million in disgorgement, penalties and interest.
The SEC issued a cease-and-desist order against PNC in connection with the case.
Monday, October 27, 2008
When the Treasury Department's bailout czar provided an update this week on the government's $700 billion plan to rescue troubled financial institutions, he vowed that it would be an "open and transparent program with appropriate oversight.''
The next day, the Treasury Department put out an announcement about a major bailout-related contract with Bank of New York Mellon Corp. that fell short in the transparency department.
The copy of the agreement that was made public had blacked-out paragraphs in the section covering Bank of New York Mellon's compensation. If the Treasury Department is unwilling to disclose the particulars of that contract -- or even the general outline of the compensation scheme -- that raises questions about how it will treat disclosure of other bailout transactions.