by Senator Rand Paul
President Obama’s announcement of Janet
Yellen as his choice as the new Federal Reserve chairman has prompted
speculation about what this might mean for our central bank. Perhaps
this can best be judged by reviewing its recent history and Yellen’s
place
in it.
It is also
important to focus on the fact that the Federal Reserve is structurally
flawed. The institution needs to be reformed to prevent Yellen, or any
other future nominee, from using the enormous power of the Fed to aid
and
abet the allies of big government. I intend on using the Senate’s
constitutional power of consent to nominations as a means to educate the
American people on the structural flaws and policies of the Fed that are
bankrupting our nation.
The Fed’s favored practice of “quantitative easing” has been
questionable at best.
One need not be an economist or mathematician to
wonder whether printing money out of thin air is a sound way to help the
economy. Still, as The Washington Post’s Neil Irwin notes,
“Yellen has been not merely an engineer of the Fed’s policies of
‘quantitative easing’ and ‘forward guidance,’ but
a consistent voice within the central bank to go further.”
Will it now go further? Matt
Nesto at Yahoo Finance added,
“Yellen, who is the current vice chair of
the Fed, is known for her staunch support of the controversial easy
money policies that have dominated Bernanke’s two terms as Fed chief.”
“Controversial,” to say the least.
The Federal Reserve might be the most secretive
institution in our history. For decades, Fed officials, politicians and
various “experts” have insisted that such secrecy was integral to
its independence, and therefore effectiveness. But during Bernanke’s two
terms we have seen QE1 (quantitative easing), QE2 and QE3, and all were
ineffective, if not destructive. An unprecedented amount of new dollars
has been injected into the economy. In 2009, it was even reported that
the Fed
could not account for $9 trillion in off-sheet balance transactions.
That amount is more than half our national debt.
When the economy doesn’t improve, what is the Fed’s
eternal answer? Print even more money. In 2013, the Fed has been
purchasing – and monetizing the government’s debt – at a rate of $85
billion a month. Just this year, they have added over
$800 billion in government debt to their balance sheets.
Apparently President Obama’s
choice for Fed chairman is just as much an advocate of this policy as her predecessor. This is madness.
The American people have a right to know what this institution is
doing with the nation’s money supply. The Federal Reserve does not need
prolonged secrecy—it needs to be audited.
I have introduced the bipartisan Federal Reserve
Transparency Act, more commonly known as “Audit the Fed.” My bill calls
to eliminate restrictions on Government Accountability Office
(GAO) audits of the Federal Reserve and mandating the Fed’s credit
facilities, securities purchases, and quantitative easing activities
would be
subject to Congressional oversight.
This bill currently has 19 co-sponsors in the Senate,
including members from both parties, and companion legislation
introduced in the House of Representatives earlier this year currently
has over 100
co-sponsors. It passed in the House with a vote of 327 to 98 on July 25,
2012.
The complicity
of
the Federal Reserve in contributing to our economic woes is something
many used to ignore, but perhaps one of my father’s greatest
achievements
as a Congressman was to bring this issue to the forefront. As we try to
get through a partial government shutdown in which the President refuses
to
compromise or negotiate monetary policy remains at the heart of our
economic crisis. A Federal Reserve completely dedicated to exorbitant
printing and
spending is a serious problem, and the fact that such policies don’t
change from one chairman to the next indicates that it is a systemic
one.
The system needs
to change. The status quo is unsustainable and quite frankly,
unforgivable.
Whether it’s Congress, this President and especially the Fed—wanton
fiscal recklessness seems to be the permanent economic policy of the
United States.
I would
like to hope that Yellen might be able to bring some sobriety to the
Fed,
but her performance to date mostly suggests that we will see more of the
same policies. I look forward to an in-depth discussion in debating her
nomination, but my ultimate decision will rest on her potential
effectiveness in reforming that historically irresponsible institution.
More of the same simply will not do.
It cannot do. I encourage every member of Congress to join me in
supporting
a thorough audit of the Federal Reserve. It is time for more
transparency in virtually every part of our government—and the Fed is
the most
logical place to start.
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