- The Washington Times - Wednesday, March 13, 2013

The spooks don’t preside over the most secretive agency of the government. It’s no place for spies or their spymasters, so it isn’t the Central Intelligence Agency, the National Security Agency or even the Office of National Intelligence. The place where the deepest secrets are kept is where the gnomes of the central banks work.

The Federal Reserve was created a century ago in the wake of financial panics that saw depositors who, worried about losing their life’s savings, withdrew all their funds in relentless runs on banks. In offering reassurance to the public with the creation of a central banking system, Congress granted monopoly power over the supply and flow of the nation’s money supply without making provisions for oversight. For generations, efforts to better understand the Fed’s operations met the response that if the Fed works as it should, it must have “independence” from the people and their elected representatives.

The value of the work the Fed has done so far is open to question. Its mandate has been to ensure stable prices and maximum employment, and neither goal has been achieved. The cost of independence, however, has been substantial. From the beginning, the Federal Reserve has presided over the wholesale destruction of the American dollar, which has lost 95 percent of its purchasing power since 1913. This failed record has fostered a growing school of economists who are questioning the structure, and even the need for, the Federal Reserve.

Despite the enormous power and influence it has over the daily lives of Americans, the Federal Reserve has never submitted its books to a full and public audit. That almost changed in 2010. The House of Representatives adopted legislation offered by Rep. Ron Paul, Texas Republican, to audit the central bank. Senate Democrats blocked efforts by Sen. David Vitter, Louisiana Republican, to add Mr. Paul’s legislative language to the Dodd-Frank Wall Street regulation bill and adopted mostly meaningless, watered-down legislation instead. Last year the House tried a second time, passing a free-standing audit bill by a veto-proof vote of 327 to 98. The Fed’s grip on the Senate remains as tight as ever; the upper chamber failed to move on the measure.

Given the Federal Reserve’s ongoing quantitative easing program that involves the purchase of $40 billion a month in bonds and mortgage-backed securities, the need for oversight has never been more critical. There’s no way to know whether these enormous deals are on the up-and-up unless independent third-party auditors look over the details. Taxpayers shouldn’t be left on the hook for billions of dollars of liabilities hidden behind a cloak of secrecy.

Naturally, the Fed opposes an audit. Chairman Ben S. Bernanke has even refused to divulge to Congress the names of the financial institutions that received trillions of dollars from the Fed — including foreign banks and firms. President Obama, who promised to deliver “the most transparent administration in history,” opposes a public audit, too.

The nation can’t afford to look the other way anymore. The Senate must join its House colleagues from both sides of the aisle to give the people a peek behind Mr. Bernanke’s curtain.

The Washington Times