“It’s so tiresome to see the Democratic leadership take the side of Wall Street, over and over and over.”

Protectors of Wall Street

A vital new book from the TARP IG, and yesterday's vote on a Fed audit, reveal some disturbing truths

By Glenn Greenwald

If you believe the Federal Reserve has done a fine job of managing monetary policy and trust it to continue to exert vast power with no accountability or transparency, then you are probably content with the status quo. But yesterday, “a powerful left-right coalition” in the House of Representatives — defying the Fed as well as a likely White House veto — voted overwhelmingly to enact Rep. Ron Paul’s bill to subject the Fed’s monetary policy to audits by the Government Accountability Office, a nonpartisan and independent congressional agency. As Dennis Kucinich, one of 89 Democrats to vote for the bill, put it: “It’s time that we stood up to the Federal Reserve that right now acts like some kind of high, exalted priesthood, unaccountable to democracy.”

Despite the large bipartisan House majority in favor of the bill, it is almost certain, as Reuters put it, “to die in the Democrat-controlled Senate.” That’s because “Majority Leader Harry Reid, Nevada Democrat, at one time expressed support for an audit — though he reportedly has changed his mind.” Indeed, despite substantial Democratic support for the bill (including some from the progressive wing, such as Kucinich, Jerry Nadler and Raul Grijalva), “every top Democratic leader [in the House] voted against the bill, including Minority Leader Nancy Pelosi of California and Whip Steny H. Hoyer of Maryland.” As former Alan Grayson aide Matt Stoller documented yesterday, Democratic leaders did not merely oppose the bill but actively whipped against it, meaning they sought to pressure caucus members to stay in line and oppose it; but as he observes: “The Democratic leaders, despite whipping, barely got a majority of the caucus to vote no. This is a massive failure on their part, and shows how weak they are.”

It was this same left-right coalition, led by Paul and joined by liberal Democrats such as Alan Grayson, that succeeded in enacting an Audit the Fed bill back in 2010. Even though that 2010 bill was substantially weakened by the same forces that oppose the bill now — the Fed, the White House, and party leadership — that audit, once completed, “revealed 16 trillion dollars in secret bank bailouts and has raised more questions about the quasi-private agency’s opaque operations” and independently showed that the Fed ignored rules to aid the largest banks. Sen. Bernie Sanders, whose watered-down Audit the Fed amendment is what passed in the Senate in 2010, said this about the audit revelations:

The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. . . . “As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said Sanders. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”

The argument has always been that the Fed must be able to act with independence and secrecy and that transparency would undermine its credibility and lead to political interference in monetary policy; especially now, the ostensible concern is that Republicans will impede necessary measures. But as Stoller points out, none of the parade of horribles about which the Fed warned resulted from the 2010 audit, and more to the point, the Fed — prime enablers of banks, crony capitalism and oligarchy — has proven that it deserves neither the trust nor the credibility which it had previously commanded. It’s remarkable to watch the Democratic Party become its most devoted defenders. As Stoller said about yesterday’s vote: “It’s so tiresome to see the Democratic leadership take the side of Wall Street, over and over and over.”

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