WASHINGTON — Top progressive senators are running away from a bill authored by Sen. Rand Paul (R-Ky.) to audit both the Federal Reserve’s monetary policy operations and millions of foreclosures. Their aversion could doom any chance for public transparency surrounding the widespread abuse that banks deployed against homeowners in the aftermath of the financial crisis.
Both Sen. Elizabeth Warren (D-Mass.) and her fellow financial reform advocate, Sen. Sherrod Brown of Ohio, the top-ranking Democrat on the Senate Banking Committee, have come out against Paul’s proposal, which would for the first time provide a public accounting of the central bank’s monetary policy maneuvers and its transactions with foreign central banks.
Warren and Brown insist they’re on board with more transparency in the Fed’s regulatory operations, but they’re drawing the line at monetary policy.
“I oppose the current version of this bill because it promotes congressional meddling in the Fed’s monetary policy decisions, which risks politicizing those decisions and may have dangerous implications for financial stability and the health of the global economy,” Warren said in a statement provided to HuffPost.
The Fed is the world’s most powerful economic institution, and its monetary policy operations are its strongest tools, setting interest rates that have tremendous influence over U.S. growth, inflation and the prices of key assets. The Fed’s arrangements with foreign central banks and governments even give it a significant role in foreign policy. Yet despite its vast political reach, the Fed is far less accountable to the democratic process than other policy-setting agencies in the American government.
While the Fed’s Board of Governors, based in Washington, D.C., is a public agency, the central bank’s 12 regional branches are private-sector entities. Two-thirds of the directors of each regional branch are selected by commercial banks in the region, and many of those directors help select the presidents of each branch. Many of these regional presidents, in turn, play a role in setting monetary policy alongside the Board of Governors.
The Fed has also (successfully) fought to prevent the public disclosure of records that detail widespread foreclosure abuses by big banks. Those documents underpinned a major 2012 settlement with the nation’s largest banks, albeit one that ultimately provided very limited relief to victims.
Sen. Paul agreed to include a public audit of the foreclosure files in his bill to audit the Fed’s monetary policy activity during negotiations with Democrats during the last session of Congress. The current bill, which is identical to the previous version, has 30 co-sponsors, only one of whom, Sen. Mazie Hirono of Hawaii, is a Democrat.