In a move that serves as a capstone to Rep. Ron Paul’s colorful career, the House on Wednesday voted to have Congress’ chief investigators conduct a full audit of the Federal Reserve’s shrouded decision-making process.
The overwhelming 327-98 vote sends the measure to the Senate, where Majority Leader Harry Reid, Nevada Democrat, at one time expressed support for an audit — though he reportedly has changed his mind.
House passage already marks a high-water mark for those who for years have been pushing for an audit, led by Mr. Paul. The Texan rode the slogan “Audit the Fed” to prominence in two Republican presidential primary campaigns, and he said the bill is a chance for Congress to begin to reclaim the money and banking powers it is given in the Constitution, but had delegated to the Fed.
“It is up to us to reassert ourselves,” Mr. Paul said during floor debate Tuesday.
Fed Chairman Ben S. Bernanke doesn’t like the prospect of such a broad audit, calling it a “nightmare scenario” last week and saying it would lead to politicians second-guessing his decisions.
Opposition in Congress came chiefly from Democratic leaders, who said they doubt the bill ever becomes law — but worried about sending a signal to financial markets that lawmakers want to intervene in financial affairs.
“It seems to me what we’re talking about is taking some fake punches at the Federal Reserve but not doing anything serious,” said Rep. Barney Frank of Massachusetts, the ranking Democrat on the House Financial Services Committee.
Every top Democratic leader voted against the bill, including Minority Leader Nancy Pelosi of California and Whip Steny H. Hoyer of Maryland, along with 95 other Democrats and one Republican, Rep. Robert L. Turner of New York.
“While I have serious concerns about the Fed’s actions during the financial crisis in 2008 and the monetary easing since then, Congress should not attempt to politicize what should be an independent institution,” said Mr. Turner.
He said the independent agency already publishes minutes from some meetings and releases its balance sheets to the public.
That wasn’t enough for 238 Republicans and 89 Democrats, who broke with their party leaders to create a powerful left-right coalition in favor of a full audit.
“The Fed wants to be spared a full audit,” said Rep. Dennis J. Kucinich, Ohio Democrat. “They want monetary deliberations private. They then use that privacy shield to keep irregularities from regulators and from congressional view, exposing investors and consumers to massive losses.”
The bill would grant the Government Accountability Office, which is Congress’ chief investigative arm, the power to retroactively review the Fed’s decision-making — particularly on monetary policy.
Congress established the Federal Reserve nearly a century ago. The system, which consists of a board of governors and 12 regional banks, acts as lender of last resort to the country’s banking system, and it is charged with fighting inflation and with promoting economic growth and employment.
The interest rates it sets have a direct impact on the rates that banks charge consumers, but Congress shielded some of the board’s decision-making from view in order to give the agency independence.
Now, after the recent financial collapse, many lawmakers have begun to question the Fed’s decisions and want a closer look at why it has taken those steps.
Mr. Frank, though, said that giving the GAO powers to look at monetary policy is a precursor to Republicans trying to change the Fed’s mission overall to focus solely on monetary policy, not employment.
The bill marks a major win for Mr. Paul, who is retiring from Congress this year after 12 terms and three presidential runs — two as a Republican and one as the Libertarian Party nominee.
On the campaign trail in 2008 and again in 2012, his call to audit the Fed drew wild applause from his supporters, many of whom said they first discovered the maverick lawmaker because of his writings on monetary policy.
The House’s action will put pressure on Mr. Reid in the Senate, where a companion audit bill is sponsored by Mr. Paul’s son, Sen. Rand Paul, Kentucky Republican.
Senate Republicans have some methods that they could use to try to force a vote on the measure, too.
Mr. Reid’s office didn’t reply to a request for comment Wednesday.
Congress has approved more limited audits of the Fed in recent years. Following through on that, the GAO reported last year that the Fed repeatedly invoked emergency authority to expand its lending during the Wall Street crisis in 2008 and 2009, including major loans to prop up the housing market.
The audit also found that the Federal Reserve Bank of New York, which had a major role in the lending, did not have sufficient controls to prevent conflicts of interest for its employees.