One of the issues that bears close watching in the coming weeks is a little know bill in the House of Representatives called HR 1207 – Federal Reserve Transparency Act. It is probably going to become more known because Rep. Ed Perlmutter (D-CO) and Rep. Chris Lee (R-NY), both House Financial Services Committee members, as well as Rep. John Boehner (R-OH), Minority Leader of the House just became co-sponsors of the bill. Currently, just 11 more cosponsors are needed for a majority to be reached in the House.
If enacted, HR 1207 will amend title 31 of the United States Code and reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States. In other words, for the first time since 1950, the independent financial powerhouse that creates and regulates all money in the US will be forced by law to open its books.
This news also dovetails with reports detailing how the House Oversight and Government Reform Committee, the panel responsible for investigating the use of bailout money, has issued a subpoena to the Federal Reserve, asking them to hand over all documents relating to the takeover of Merrill Lynch by the Bank of America.
Claims by New York Attorney-General Andrew Cuomo that former Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke strong-armed Bank of America into buying Merrill, are giving politics and power a new definition in Washington.
If this bill passes the House, expect the debate to be significantly loud and fierce in the US Senate. This bill and corresponding debate could have a definite impact on stocks, bonds, and the dollar as many believe the Federal Reserve is not well capitalized. Even Jim Grant made a comment this week on CNBC stating the Federal Reserve probably couldn’t survive a conventional audit and would have be shut down. His discussion on the Federal Reserve can be seen below.
