May 11, 2010 in News
Senate approves Federal Reserve amendment (Politico):
The Senate approved an amendment to the Wall Street reform bill Tuesday that would order a one-time audit of the Federal Reserve if the underlying legislation passes.
The amendment, which passed 96-0 with overwhelming bipartisan support, was the product of a deal brokered late last week by sponsor Sen. Bernie Sanders (D-Vt.) and Banking Committee Chairman Chris Dodd (D-Conn.) to make the provision acceptable to White House and Treasury officials, and appealing to Senate moderates.
Sanders’s modified language sets a firm time window for the review of the Fed—from Dec. 1, 2007 to the day the legislation is signed into law—and restricts the Government Accountability Office from looking into the Fed’s decision-making on interest rates.
Fed Chairman Ben Bernanke had serious objections to Sanders’ original bill because he feared it would impinge on the Fed’s historic independence by involving Congress in monetary policy decisions.
“The Sanders Amendment makes it clear that the Fed can no longer operate in the kind of secrecy that it has operated in forever,” Sanders said on the floor before the vote. “Under the Sanders Amendment, for the first time, the American people will know exactly who received over $2 trillion in zero or virtually zero interest loans from the Fed and they will know the exact terms of those financial arrangements.”
The Senate rejected an amendment by Sen. David Vitter (R-La.) to use the stricter House language on the Fed in the Senate bill. The vote was 37 to 62.
The Senate also voted 43 to 56 to reject an amendment from Sen. John McCain (R-Ariz.) that would have forced the government to end its control of mortgage giants Fannie Mae and Freddie Mac within two years. Dodd’s bill does not address the two government-sponsored enterprises, drawing strong criticism from Republicans who say their risky loans played a major role in the 2008 economic crisis.
Democrats have vowed to overhaul the mortgage companies later in the year. But with a request this week by Fannie Mae for another $8.4 billion in federal aid, Republicans are pressing their colleagues across the aisle to explain why the financial overhaul bill doesn’t address the companies.
Senate Backs Audit of Fed Bailout Role (New York Times):
The Senate voted unanimously on Tuesday to require an audit of the Federal Reserve’s emergency actions during and after the 2008 financial crisis as part of broad legislation overhauling the nation’s financial regulatory system.
The amendment, proposed by Senator Bernard Sanders, independent of Vermont, would require the Government Accountability Office to scrutinize some $2 trillion in emergency loans that the Fed provided to some of the nation’s biggest banks.
The vote was 96 to 0.
Mr. Sanders, a professed socialist, has long demanded greater transparency at the central bank, and his original plan could have subjected the Fed to continuing audits of some of its routine operations. But he agreed to scale it back in the face of opposition from the White House, the Fed, the Treasury and some Senate colleagues.
While the Senate provision would require an audit of the Fed’s emergency operations beginning on Dec. 1, 2007, the House approved tougher audit requirements late last year in its version of the financial regulatory legislation. Once the larger Senate bill is adopted, the provisions will have to be reconciled.
Senator David Vitter, Republican of Louisiana, put forward an amendment that would have mirrored the stricter House language. But the Senate rejected it Tuesday, 62 to 37. Mr. Sanders and six Democrats joined 30 Republicans in favor.
Later on Tuesday, the Senate voted by 63 to 36 to require the Treasury Department to study the prospect of ending the federal conservatorship of the government-sponsored mortgage giants, Fannie Mae and Freddie Mac.
Senate votes to examine Federal Reserve lending (AP):
The Senate voted unanimously to peer into Federal Reserve decision-making Tuesday, authorizing an examination of the central bank’s emergency lending to financial institutions in the months surrounding the 2008 financial crisis.
Separately, Democrats rejected a Republican plan to end the government’s support of mortgage giants Fannie Mae and Freddie Mac — a financial rescue that now stands at $145 billion. Instead, the Senate voted to instruct the Treasury to study and recommend how the government can end its relationship with the two housing finance companies.
The two measures that passed were amendments to a comprehensive financial regulation bill that the Senate intends to wrap up sometime next week.
Passed 96-0, the Fed measure requires a one-time audit of the central bank’s more than $2 trillion in lending and the disclosure of all recipients of that assistance. A proposal for a broader review of the Fed failed.
The vote came as the Fed ramped up its emergency program to keep a European debt crisis from spreading further. In a sign of the Fed’s sensitivity to congressional scrutiny, Fed Chairman Ben Bernanke on Tuesday promised weekly reports on its efforts to help protect the euro.
The Fed has become a target of public anger in the aftermath of Wall Street’s near meltdown in the fall of 2008, taking blame for not seeing the coming collapse and for having what some perceive as too cozy a relationship with the nation’s largest institutions. That, coupled with its closely guarded lending, has created a bipartisan environment to get the Fed to open up.
“The Fed can no longer operate in the kind of secrecy that it has operated forever,” said Sen. Bernard Sanders, I-Vt., the main author of the audit amendment.
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