Ron Paul defends his plan for Fed oversight

By Cyrus Sanati, The New York Times

Defending himself against critics, U.S. Rep. Ron Paul of Texas played down continuing concerns on Friday that his amendment to give Congress sweeping new oversight powers over the Federal Reserve would compromise the central bank’s political independence. He asserted that the Fed was not truly as independent as it would like the public to believe.

“There is already a tremendous amount of political pressure on the Fed,” Mr. Paul, a libertarian Republican, told DealBook. “The Federal Reserve Board chairmen have notoriously been sympathetic to the presidents who might be reappointing them and there has been evidence to show that.”

Mr. Paul also asserted that the Fed was beholden to pressures beyond the government from special interests, including Wall Street.

“It’s not like the banks and Goldman Sachs don’t have influence over the Fed,” Mr. Paul said. “Every time the Fed says it wants its independence, what they are really saying is, ‘We want to keep our secrets.’”

The renewed attacks on Mr. Paul’s controversial amendment to provide audits of the Fed come after the House Financial Services Committee voted Thursday night to insert the amendment into its version of the financial overhaul bill.

The amendment would allow the Government Accountability Office, the investigative arm of Congress, to have access to a vast array of information on the nation’s monetary policy currently out of their reach, including information on the Fed’s emergency lending programs, information on the financial bailouts, the Fed’s dealings with foreign central banks and the Fed’s decisions to drive down interest rates by intervening in bond markets.

Rep. Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, told DealBook that he voted against the amendment because he said he felt “it went a little bit too far.” But he noted that he could support it going forward if it did not dispel the “perception” that the Fed is independent.

“The problem with monetary policy is that perception plays a real role and I did worry that that could lead people inside America and also outside to be worried about the integrity of the monetary policy function,” Mr. Frank said. “If it turns out that the amendment does not cause these kind of concerns, then I would be fine with that.”

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