In his blog yesterday, The Washington establishment suffers a serious defeat, Glenzilla summarizes the significance of Thursday’s bi-partisan vote on the Paul-Grayson Bill in the House Finance Committee that calls for an audit of the Federal Reserve.
This is an effort that goes back at least 57 years when Congressman Wright Patman of the House Banking and Currency Committee complained:
In fact there has never been an independent audit of either of the 12 banks of the Federal Reserve Board that has been filed with the Congress where a Member would have an opportunity to inspect it. The General Accounting Office does not have jurisdiction over the Federal Reserve.
Upon becoming chairman of that same committee twelve years later, he tried to press for an audit, as reported in this article from the February 14, 1964 edition of Time Magazine :
In a Washington hearing last week, the chairman of the House Banking Committee stared at one of the nation’s top managers of money. Grumbled Texas Representative Wright Patman: “You can absolutely veto everything the President does. You have the power to veto what the Congress does, and the fact is that you have done it. You are going too far.”
The object of Patman’s wrath was ascetic-looking Alfred Hayes, president of the New York Federal Reserve Bank and a ranking member of the U.S.’s powerful central banking system. For three decades, Wright Patman has fumed and fussed that the Federal Reserve System is too secretive, too independent, too insensitive to the hopes of small borrowers. A sharecropper’s son, he often charges that it is a tool of Wall Street bankers.
Immediately after moving up to the chairmanship of the Banking Committee last year, Patman started preparing what has become one of the farthest reaching investigations in the Federal Reserve’s 50-year history. Patman has a team of economists and consultants studying the system with a critical eye, intends to call twelve top non-Government economists to the stand by month’s end, and is pressing for new legislation to curb the central bank.
Patman was, of course, unsuccessful in his efforts, which makes the passage of the Paul-Grayson bill all the more historic. (And a shoutout to Jane Hamsher at FDL for organizing a supportive letter writing campaign. ) Pulling the curtain back from that most secretive and powerful of quasi-government agencies would have to count as the greatest revolutionary act to come out of the US Congress in the last century, assuming it ever becomes law.
Meanwhile, the long knives are out on Capitol Hill for Treasury Secretary Timothy Geithner, who got both barrels during his testimony Thursday at a joint congressional committee on the miserable state of the economy. It didn’t help Geithner’s case that earlier in the week TARP Inspector General Neil Barofsky released his scathing report about the botched AIG bailout that Geithner oversaw as the then head of the NY Federal Reserve Bank.
While even Paul Krugman allows that the bailout was probably necessary to prevent another Great Depression, the terms which Geithner negotiated with the likes of Goldman Sachs really sucked. Goldmanvreceived $12.9 billion from American taxpayers, or 100 cents on the dollar for its speculative insurance bets. Warren Buffet, on the other hand, made them pay dearly for his investment in their company, which in combination with the taxpayers’ contribution, saved their sorry asses from bankruptcy. A growing number of congressmen from both sides of the aisle are now calling for Geithner’s resignation, including Rep. Peter DeFazio (D-OR) who is trying to enlist the support of the Progressive Caucus.
Geithner represents a growing political threat to the Obama Administration. In addition to the AIG fiasco, he is perceived as colluding with the Fed in shoveling hundreds of billions of dollars of interest free loans to other “Too Big To Fail” financial institutions, without even requiring them to pass the money down to the regional and community banks where that money could be lent to local businesses to create things like, oh, you know–JOBS! Or provide mortgage write-downs for American homeowners bamboozled into loans they couldn’t afford, 14% of whom are either delinquent in their payments or are already in foreclosure, with no end in sight. Or provide any number of programs that could help ordinary Main Street Americans cope with the disaster that Wall Street has inflicted on them.
Instead, the Wall Street gangsta bankstas are using our money to lend it right back to us at a huge markup by buying US Treasuries, trading for their own proprietary accounts, buying up their competition, or shipping it overseas and placing all that moolah into tax-free bearing accounts. It’s like walking into a casino and having the house provide the gambler an unlimited amount of chips– heads they win, tails we lose; socialism for the rich, capitalism for the poor; privatizing the profits, socializing the losses.
Krugman, discussing the AIG bailout in his column Friday, ends with this:
So here’s the real tragedy of the botched bailout: Government officials, perhaps influenced by spending too much time with bankers, forgot that if you want to govern effectively you have retain the trust of the people. And by treating the financial industry — which got us into this mess in the first place — with kid gloves, they have squandered that trust.”
It would be the irony of all ironies if the Rethuglicans, who engineered this mess, succeed in grabbing the populist mantle from the Dems and become identified in the public mind as fiscally responsible agents of change.
If that happens, just shoot me.