A key amendment that has been gaining traction in the Senate is Sanders' effort to give the GAO more power to audit certain operations of the Fed. On Friday, a very good argument for greater Fed transparency emerged: Alan Greenspan's successful suppression of housing-bubble dissent in the Fed in 2004.
As top Federal Reserve officials debated whether there was a housing bubble and what to do about it, then-Chairman Alan Greenspan argued that the dissent should be kept secret so that the Fed wouldn't lose control of the debate to people less well-informed than themselves....
At the same meeting, a Federal Reserve bank president from Atlanta, Jack Guynn, warned that "a number of folks are expressing growing concern about potential overbuilding and worrisome speculation in the real estate markets, especially in Florida. Entire condo projects and upscale residential lots are being pre-sold before any construction, with buyers freely admitting that they have no intention of occupying the units or building on the land but rather are counting on 'flipping' the properties--selling them quickly at higher prices."
Had Guynn's warning been heeded and the housing market cooled, the financial collapse of 2008 could have been avoided. But his comment was kept secret until Friday, when the central bank released the transcripts of Federal Open Market Committee meetings for 2004 and CalculatedRisk spotted it. The transcripts for 2005 to the present are still secret....
Other than the passing mention of speculation, the March minutes imply that the meeting participants had a rosy outlook on the housing bubble. "Activity in the housing market moderated in January and February from its elevated pace in the fourth quarter. Single-family housing starts and permits stepped down, although both measures remained above their average levels of the first three quarters of 2003," the minutes read. "Overall, expenditures were supported by sizable gains in real disposable personal income and increases in household wealth owing to rising home and equity prices. ... Committee members noted that activity in the housing sector, while still quite elevated, had fallen back from its extraordinary pace of late last year."
When the Fed released minutes of this meeting back in 2004, Guynn's warnings were watered down. The rest is, unfortunately, disastrous history.
The argument for greater Fed transparency is certainly bolstered by this, and it could blunt the opposition of the administration and the Fed to Sanders' amendment. A Fed audit provision by Alan Grayson passed in the House version of the bill.