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Bill Radke: An amendment approved yesterday to the financial system overhaul bill in Congress would force the Government Accountability Office to look at everything the Federal Reserve does. Critics say the measure could undermine the Fed’s work.
Marketplace’s Alisa Roth joins us live from our New York bureau. Good morning.
Alisa Roth: Good morning.
Radke: This is in the House, and Texas Republican Ron Paul has been introducing some version of this for decades now. What’s he looking for?
Roth: You know, in its most extreme versions, Paul has called for abolishing the Federal Reserve outright. This time, he’s got a much tamer. He just wants the GAO to audit all of the Fed’s business. This is really the first time in all the years that Paul has talked about this that the idea has gotten any play at all from the more mainstream elements in Congress.
Radke: Well, a bunch of stuff the Fed does is public — the bailouts were public. Should we be demanding more transparency?
Roth: Obviously, it depends who you ask. I talked to Kenneth Kim this morning. He’s a Fed watcher at a research firm called Stone and McCarthy. This is what he said:
Kenneth Kim From a public standpoint, you would like to have open deliberative discussions regarding matters that could affect the public as well as the U.S. government.
But then he went on to tell me some of the things that worry Fed officials about having more openness. Like for example, when banks that are members of the Federal Reserve system borrow money from the Fed at what’s called the discount window.
Kim: If it became known in advance which institutions might be approaching the discount window, then there might have been a speculative run on those institutions, and then, you know, we could have had even more failures that could have dragged the financial system down quicker.
It’s also worth mentioning here that there are plenty of people, including Barney Frank, who are coming down on the side of the Fed on this one.
Radke: Marketplace’s Alisa Roth, joining us live from our New York bureau. Thank you.
Roth: You’re welcome.
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