Monday, September 28, 2009
The House Committee on Financial Services has just posted the video of Barney Frank's opening statement on the bill to audit the fed (HR 1207).
Frank provided some very interesting history in his opening statement.
Specifically, Frank says that Ron Paul originally introduced the bill for the first time in 1983. But for 12 years after that, the Republicans used their control of the Finance Committee to insure that there was "no time" to give Paul's bill a hearing.
In 2003, when Paul was in line to become chair of the domestic monetary subcommittee, that subcommittee - coincidentally enough - immediately disappeared, and was merged into another subcommittee in order to shield the Federal Reserve from the imminent oversight which a monetary subcommittee under Paul would presumably create.
Watch the video.
Update: A congressional aid just me with provided the following transcript of Frank's opening statement:
This is an historic hearing. The Gentleman from Texas, Mr. Paul, filed this bill for the first time in 1983. There then ensued a number of things including 12 years in which the Republican Party controlled the agenda of this committee and found no time for this hearing. So I am very pleased, in this show of bipartisanship, to have been the one to have given this important piece of legislation its first hearing ever. Indeed, and I think this history is relevant, because we (mumbles at 0:38) partisan issue. The first time this committee, in my experience – having come here in 1981, engaged with the Federal Reserve, and I think it was true of the ‘70s and ‘60s as well, but the first time this committee dealt with the questions of openness and transparency of the Federal Reserve was under the leadership of the great chairman who is pictured over my right shoulder – Henry B. Gonzalez. In fact, a former chief economist of this committee, Robert Auerbach, has written a book, and I get no share of the proceeds, but it was: [Something] and Deception at the Fed. It was a description of the efforts by Mr. Gonzalez, ultimately successful, to compel the Federal Reserve to be more open. It’s astonishing to me to remember that when I first came here the decisions of the Open Market Committee were never announced. Now, how you influence interest rates by concealing from the market what you decide to do is very odd. What it shows is that the penchant for secrecy outweighed the desire to be effective; because it clearly could not have been as effective to have a secret directive to the markets, which of course got leaked and distorted, etc.
There were minutes that had been taken at the Federal Reserve meetings. The Federal Reserve at the time – 1983, denied in the later 80s when Mr. Gonzalez became chairman, they denied that there had been minutes. They were later ‘found in a drawer.’ There were not reports released. So this is not a new thing for this committee. There was an effort to open it up and there was significant increased opening. The other point that is relevant, and I do want to say to make sure that this is not a partisan issue, is [facts on the record] in 2003 the gentleman from Texas, Mr. Paul was in line in seniority to be chairman of the Domestic Monetary Policy Subcommittee. That subcommittee immediately disappeared. It was merged into the International Monetary Policy Subcommittee because there were people who were trying to shield the Federal Reserve from Mr. Paul’s influence. Two years later, when they could not merge that subcommittee further into the Housing Subcommittee (although they probably thought about it), a member of this committee, with some seniority, who had not previously taken the subcommittee chairmanship - Congressman was persuaded to come over and do this. So this is the first time this bill was filed, and despite a bipartisan ignoring of the issue, and this is the first time that we have had had the hearing and we are serious about some legislation in this regard.
I will say that I have a couple of concerns. The Federal Reserve engages in considerable market activity – they buy and sell. I do believe that it is important to note, that in our society that that be made public. We don’t want public entities buying and selling securities with nobody else ever knowing. I also believe, however, that there needs to be some time to elapse so that their buying and selling does not have a direct market effect. [Some time so] that other people can’t ride on it. So that’s one area where I will be working with the gentleman from Texas, and we’ve discussed it. We want there to be publicity, we don’t want there to be a market effect in the near term. We don’t want people trading with the Fed or against the Fed, etc. As to monetary policy: I think it’s also clear that we don’t want…I believe, and have exercised that right for some time, to comment on monetary policy…the notion that no elected official should ever comment on something so important as monetary policy is profoundly anti-democratic. I believe that we should continue to do that, and that’s something I’ve been doing since I got here. We don’t want to give the rest of the world, or more importantly, domestic investors the impression that we are somehow, in a formal way, injecting Congress into the setting of monetary policy. Because I think that could have a very destabilizing effect. I don’t think that will be hard to do without in any other way interfering with other functions. But, how the Federal Reserve carries out what it is doing, its buying and selling (what it buys and sells), all those, given its importance, can entirely and legitimately be made open.And I will say this – there were predictions. One of the things that the media fails to do…the media rarely passes up a chance to refute those of us who are in office, but they get bored too easily. There are often predictions of doom whenever people in Congress propose to do something. Very often those predictions of doom go unrealized and there is too little checking. I urge people, if you are interested in this, go back to some of the predictions that were made in the late 80s, when under the leadership of Henry Gonzalez…when the Fed was not being legislated but pressured to make some changes, read about the predictions of doom and note that none of them came to pass. I believe that we are similarly able in a wholly responsible way, without in any way be interfering in the independence of the monetary policy setting function or with the integrity of the markets, to go forward with completing the job. And, I would say, completing the job that really did begin with Henry Gonzalez – but completing it, and a lot needs to be done. The gentleman from Texas has been in the lead in pushing for that. [He has been] making sure that this important part of our federal government is subjected to the same rules of openness that every other element in a democratic government should be.