“The Fed Lobbies Congress Using Public Funds”

Over at Washington Post’s “Wonkblog,” Matt O’Brien opines that “Rand Paul has a new conspiracy theory about the Fed”…

So what is this alleged, “new conspiracy theory”?

“The Fed, with unlimited power to print money,” Paul says, “now prints that money to lobby against Congressional oversight.”

That’s quite an accusation. If it were true that the Fed was printing money to basically bribe Congress with, it’d be one of the biggest scandals in recent memory. Heck, if it were even true that the Fed was printing money at all right now, it’d be a big story since it stopped last year. So what’s Rand Paul’s proof? Oh, that’s right. He doesn’t have any. He’s just saying unsubstantiated things to try to rile people up and raise more money from them.

Well, perhaps Mr. O’Brien never came across Professor Robert Auerbach’s work on the House Banking Committee (today’s House Financial Services), and the subsequent book he authored, Deception and Abuse at the Fed: Henry B. Gonzalez Battles Alan Greenspan’s Bank.

On page 156, Auerbach titles the section “The Fed Lobbies Congress Using Public Funds.” The source for this claim comes from House Banking Chairman Henry Reuss in 1976 in a floor speech titled, “What the Secret Minutes of the Federal Reserve Banks Meetings Disclose.” Auerbach writes:

It documented how the Fed used its funds – public monies – to organize the bankers it regulates to lobby Congress. He revealed that Fed officials used taxpayers’ money to fly to Fed Banks and instruct the directors to organize private-sector bankers to lobby against bills that would bring outside auditors and public accountability to the Fed

He continued:

The Fed-orchestrated lobby helped keep the audit bills considered in the House Banking Committee from reaching the full House for a vote. The bill was then considered in another committee, the Government Reform Committee. The Fed successfully lobbied for limitations on audits both by the General Accounting Office and private accounting firms. The final audit law, the Federal Banking Agency Audit Act of 1978, placed the Fed’s monetary and international-exchange activities off-limits for outside auditors. Those limitations may be stretched to cover many Fed operations, and they remain in force, severely curtailing audits of the Fed.

It is those very restrictions put in place in 1978 that Senator Rand Paul’s Audit the Fed bill, S. 264 would remove.

Maybe next time Mr. O’Brien can leave his snark where he apparently left his objectivity.