The Fed Audit as Bill Killer

Starting today, Sen. Bernie Sanders (I-Vt.) begins his push to ensure that a thorough audit of the Federal Reserve’s books, which Chairman Ben Bernanke expanded by more than $1 trillion to stave off the worst of the financial crisis, makes it into Sen. Chris Dodd’s (D-Conn.) financial regulatory reform bill. Sanders’ amendment is unusual in that it has bipartisan support from the most liberal and most conservative senators — from everyone from say, Sen. Jim DeMint (R-S.C.) to, well, Sanders himself, a committed social democrat in the European tradition. And the support is broad as well.

Just what does Sanders want to audit? It seems that the answer is just about everything, save for transcripts and other documents related to the Federal Reserve’s monetary policymaking. (That is, things like interest rate and money supply policies.) Sanders and a number of other members of Congress argue that the Fed went so far beyond its mandate and increased its lending and books so dramatically during the recession that the entire central bank needs bolstered and transparent analysis.

But as popular as auditing the Fed is on the Hill, members of the executive branch — including President Barack Obama, Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke, who argue that the audit provisions might politicize the monetary policymaking process and weaken the Fed’s programs to aid systemically important firms with financial problems, as well as disrupting financial markets more generally — want the audit provision struck from the legislation. That could happen during the amendment process, or when the House and Senate bills are merged. But the provision stands a decent chance of making it through — raising the question of whether Obama might actually veto the bill if it comes with a strong audit-the-Fed measure.