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As you're reading this, over at the House Financial Services Committee hearing that's occurring right now, and based upon reports in the MSM over the past 24+ hours, it would appear that many powerful forces are at work in the lobbying community to derail Main Street's efforts to shed some transparency as to where $12-$13 trillion in taxpayer cash, backstops and government loan guarantees went--all delivered up by the Federal Reserve and the U.S. Treasury Department over the past 14 months--off the tracks and into that legislative abyss where the highly-secretive Fed has been operating all along.

The streamed proceedings of the House Financial Services Committee, in real time, are available RIGHT HERE.

On a directly-related development, Representative Elijah Cummings, in a letter he sent to House Financial Services Committee Chair Barney Frank and Senate Banking Committee Chair Chris Dodd late yesterday, also signed by Reps. Doggett, Grayson, Hinchey, Tierney, Walz and Welch, demands more transparency from our government on these matters. In it, Cummings states: "...transparency must be the hallmark any use of government funds." A couple of paragraphs later, he tells us:

1.) The Federal Reserve refused to negotiate on behalf of the US Taxpayer in good faith when it came time to compel banks to accept at least a portion of the losses realized by AIG (you may read about this right here: "Fed `Severely Limited' Savings on AIG, Watchdog Says.")

2.) Points out that its ludicrous that banks, supposedly regulated by the Fed, actually choose the heads of their respective regional branches. Cummings refers to it as " inherent conflict of interest."

3.) "The Federal Reserve has continually resisted efforts to engage in discussion and governance reform at the [branch] System." Just yesterday, the Fed rejected a White House request to conduct a public review of its structure and operations.

4.) "Fourth, and most importantly, the Federal Reserve has shown a repeated unwillingness to accept efforts to improve transparency of the System."

(h/t to Naked Capitalism and HuffPo)

Read all about this scam being supported by the Wall Street lobbyists, right here: "Audit the Fed Bill: Attempted Saturday Night Massacre Underway."

Audit the Fed Bill: Attempted Saturday Night Massacre Underway
Yves Smith
Tuesday, November 17, 2009
Naked Capitalism

So get this, sports fans: the day (or maybe two max) before the so-called Audit the Fed bill (a bipartisan initiative to increase transparency) has a torpedo shot at it by a member of the House Financial Services committee, one Mel Watt of North Carolina. Of course, his amendment professes to increase transparency, too, but in fact does nothing of the kind, and in fact would reduce the GAO's audit powers over the Fed.

From HuffPo: "Audit the Fed Effort Under Threat In House."

Rep. Mel Watt, a Democrat from North Carolina, has introduced an amendment intended as an alternative to the measure to audit the Federal Reserve introduced by Reps. Ron Paul (R-Texas) and Alan Grayson's (D-Fla.) . But instead of increasing transparency, as the amendment claims to do, Watt's measure would instead make the institution more opaque....

Watt pitched his amendment in a letter to colleagues circulated Tuesday. "While my amendment will certainly fall short of demands by those intent on destroying the independence (if not the existence) of the Fed, the critics of my amendment will have to concede...that my amendment will provide transparency of the Fed's financial operations that will be completely unprecedented," he wrote.

In fact, the critics are conceding no such thing. "The Watt Amendment, as written today, actually places new restrictions on the little authority that exists, such as it is, for independent auditing of the Fed," Grayson said. "It keeps in place all existing restrictions and adds four more. So I don't see why anybody would reasonably think that it creates unprecedented authority to audit the Fed."

The devil, as always, is in the details. While Watt's amendment talks a big game about opening up the Fed to a complete audit, all of the new powers granted must be carried out "each case in accordance with subsections (b) and (e)."

Those subsections of the current law delineate the many restrictions that an auditor confronts when seeking to audit the Fed. Watt's measure not only leaves those in place but requires all audits to abide by them.

And in addition to the current restrictions in place, it creates new ones. An auditor could not look at loans or liquidity arrangements the Fed enters into, the terms of those arrangements, or the effect of those loans and other liquidity deals on "reserves, the balance sheet or financial condition of a Federal reserve bank or the Federal Reserve System."

The HuffPo article continues on to tell us of how dramatically the Fed has taken on banks' debt  over the past year, complete with "entering  into exotic swap arrangements and otherwise pumping trillions of dollars into the economy. How it has done so and who has been on the receiving end would remain secret under Watt's bill."

The Paul-Grayson amendment is very much corresponds to Paul's original Audit-the-Fed bill, HR 1207, "which has broad bipartisan support," with more than 310 cosponsors, or slightly less than 3/4 of the entire Congress.

Paul's measure would repeal the provisions that Watt's leaves in place. If every member who cosponsored Paul's bill votes for it in committee this week, it would have the votes to pass. Watt's amendment is an effort to peel off votes...

"The new exemptions are described as limited but they are extremely broad," Grayson said. They're so broad, in fact, that there would be very little left for an auditor to look into. What could an auditor check up on?

Here are the Democratic members of the Committee that support Paul's bill, but these are the folks whom we'd consider to be the targets, as far as all of Watt's Kabuki is concerned.  As Yves noted, they have a choice, to either water down the bill to worse-than-nothingness, by supporting the Watt amendment, or to put some muscle behind it by supporting the Paul-Grayson amendment to it, instead:

Rep. John Adler, NJ: (202) 225-4765
Rep. Travis Childers, MS: (202) 225-4306
Rep. Steve Driehaus, OH: (202) 225-2216
Rep. Rubén Hinojosa, TX: (202) 225-2531
Rep. Suzanne Kosmas, FL: (877) 956-7627
Rep. Dan Maffei, NY: (202) 225-3701
Rep. Brad Miller, NC: (202) 225-3032
Rep. Walt Minnick, ID: (202) 225-6611
Rep. Ed Perlmutter, CO: (202) 225-2645
Rep. David Scott, GA: (202) 225-2939
Rep. Brad Sherman, CA: (202) 225-5911
Rep. Jackie Speier, CA: (202) 225-3531


Originally posted to on Thu Nov 19, 2009 at 12:25 PM PST.

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