By Harley Austin | United States
In the United States, the Federal Reserve is the central bank that controls the money supply of the U.S. dollar. In 1913, Woodrow Wilson created the Federal Reserve. Nicknamed “The Fed,” it also controls the banking and financial systems in the US. However, despite common belief, the Federal Reserve is not a government agency.
The Fed mainly consists of 12 District Reserve Banks, all of which are private. The Fed is run by its Board of Governors, who are appointed by the President and serve 12 year terms. Wilson originally created the Fed to stabilize the US economy and financial system. However, since its foundation, especially after the end of the gold standard in 1971, the inflation of the US dollar has skyrocketed. Many have blamed the Federal Reserve and sought out greater transparency and oversight.
The Federal Reserve Transparency Acts
In 2009, Ron Paul, representative of Texas at that time, introduced the first bill to reform the Fed’s audit system: The Federal Reserve Transparency Act. Ron Paul, a libertarian, has been a very strong opponent of the Federal Reserve system, notably in his book End the Fed. The bill would have expanded the current audit system to include all of the Fed’s activities and would have made the audit results directly accessible to congress. This would have allowed for transparency and congressional oversight into the Fed’s activities to make sure the Fed is operating properly. However, the bill failed to pass in the Senate.
Ever since, numerous similar bills have been proposed, mainly by Kentucky Representative Thomas Massie and Kentucky Senator Rand Paul, son of Ron Paul. Unfortunately, none of these bills have succeeded. Luckily, Massie has proposed a new bill to audit the Fed, which has a very high chance of succeeding.
The New Bill Could Succeed
The House Oversight Committee recently approved Thomas Massie’s Federal Reserve Transparency Act of 2017. As of now, the bill awaits a floor vote, which House Speaker Paul Ryan can schedule. Massie declared this in a recent tweet, saying:
Thank you @SteveForbesCEO ! My Audit the Fed bill passed our House @GOPoversight committee this Congress. Now America waits for @SpeakerRyan to schedule a floor vote in the House. @realDonaldTrump has said he supports our Audit the Fed bill. #auditthefed https://t.co/P6E3nPzqYD
— Thomas Massie (@RepThomasMassie) August 9, 2018
What sets this bill apart from the many that came before it? First, the GOP majority in both the House and Senate is a major advantage, since this type of bill generally gets more support from Republicans. However, the upcoming midterms could change the balance of powers in congress, which would impact the bill’s chances.
Fortunately, the bill could have a major ally: President Trump. All previous bills came during the Obama administration, which greatly hindered their success, as the former president opposed an audit. With the guaranteed Obama veto gone, the bill finally has a chance of passing. To add to this, Donald Trump has criticized the Fed’s policies in the past, so it’s likely he’ll support the bill. In 2016, during the campaign, Donald Trump tweeted this:
It is so important to audit The Federal Reserve, and yet Ted Cruz missed the vote on the bill that would allow this to be done.
— Donald J. Trump (@realDonaldTrump) February 22, 2016
Whether Trump will keep to his word or abandon it is anyone’s guess. However, the new bill has the greatest chances of finally auditing the Federal Reserve. Assuming Trump will sign, the bill’s biggest problems will be getting a vote on it and getting enough Republican support. These two steps hindered many previous bills.
Will this new bill finally bring the long awaited audit or fall flat like the ones before? We can only wait and see.
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