House Moves to Give More Access for GAO, SIGTARP, and the Public

While the attention of many transparency advocates has been focused on the first round of recipient reporting under the American Recovery and Reinvestment Act (the Recovery Act), the House has been working on two financial transparency measures dealing with the Federal Reserve and use of the Wall Street bailout funds.

Within the past month, the Financial Services Committee folded Rep. Ron Paul's (R-TX) popular "Audit the Fed" bill into the committee's larger financial reform package, and the House passed Rep. Carol Maloney's (D-NY) bill creating a database collecting Troubled Asset Relief Program (TARP) data. Both bills give oversight agencies more information and access, and, along with the Recovery Act, are part of a pattern of greater fiscal transparency in the federal government. However, both bills have only passed the House and could face significant hurdles in the Senate.

While the financial crisis happened only recently, the effort to audit the Federal Reserve stretches back decades. Every session for the past several decades, Paul has been introducing a bill to abolish the Federal Reserve entirely, along with a more moderate bill calling for an audit of the Fed. While the bill [1] to abolish the Fed usually gains little traction, the other proposal has become very popular in 2009. The audit bill [2] orders the Government Accountability Office (GAO) to audit the Fed and provide Congress, but not the public, with the findings of this audit. The GAO already audits [3] parts of the Fed but is not allowed to investigate the Fed's monetary policy, so how this audit is accomplished is a sticking point. Paul's bill would allow the GAO to audit the entire Federal Reserve, a goal which the Fed, along with some members of Congress, are uncomfortable with.

Critics believe [4] that subjecting the Fed's monetary deliberations to outside scrutiny would lead to political oversight by Congress, or at the very least, hinder the Fed's ability to affect financial markets. These concerns led Rep. Barney Frank (D-MA), chair of the House Financial Services Committee, which has jurisdiction over the bill, to attempt to scale it back [5].

In late November, however, the committee voted [6] 43-26 to add Paul's bill to the larger financial reform package [7] with a few changes, which ironically Paul has said he will oppose because it is part of the broader financial reform package. The new bill allows uninhibited audits of the Fed's balance sheet, giving the GAO access to the Fed's direct loans to financial institutions (the so-called "discount window"), and lending to foreign banks, both of which were controversial parts of the recent bailout effort. But there are still exemptions for transcripts and minutes of meetings of the Federal Open Market Committee, which deals with monetary policy, and there is also a delay before the Fed's market actions are released by the GAO. Despite these exceptions, the audit would help shed light on underreported aspects of the bailout, while assuaging critics who fear congressional oversight of the Fed.

Recently, supporters of the "Audit the Fed" proposal in the Senate took steps to highlight their concerns about the lack of transparency at the Fed. Demanding a vote on the Senate version of the "Audit the Fed" bill, Sen. Jim DeMint (R-SC) has placed a hold [8] on the confirmation of Federal Reserve Board Chairman Ben Bernanke until the Senate votes on the bill. Sen. David Vitter (R-LA) also placed a hold on the Fed chief’s confirmation until the bill sees a floor debate. While a vote to proceed on the Bernanke confirmation will likely receive the 60 votes necessary to overcome the holds, the Fed audit bill has itself drawn a hold from Senate transparency opponents.

The other bill currently moving through Congress involves creating a database to track, in real time, TARP expenditures. Maloney introduced the bill in March, but it lay dormant until November, when it began gathering steam that led to its unanimous passage [9] in the House on Dec. 2. Unlike the Recovery Act, which created an entirely new system for collecting data, the database would only collect already existing data, centralizing a great deal of information from across the federal government, including regulatory data, filing data, news clippings, press releases, public records, and information already reported to the federal government by TARP recipients. It would also collect on at least a daily basis "all data that is relevant to determining the effectiveness of the Troubled Asset Relief Program in stimulating prudent lending and strengthening bank capital." This information would help authorities such as the Special Inspector General for TARP (SIGTARP) follow TARP funds and evaluate the program.

The bill also allows for public access to the database, which would give citizens the ability to track the money themselves. While this clause was not a part of the original bill, it is an important transparency measure. While it is difficult for regulators and government entities to compile such information, it is almost impossible for anyone outside of government to find and aggregate this kind of data. Maloney's bill would allow citizens to easily see which institutions have received TARP funding and what kind of an effect the program is having on the institutions and the economy.

The next hurdle for both bills is the Senate, which could slow progress. While Paul's bill had over three hundred sponsors in the House, only thirty have signed onto the Senate version, most of them Republicans, and the Senate Banking Committee has yet to hold a hearing on the bill. In fact, Sen. Chris Dodd (D-CT), chair of the Banking Committee, specifically did not include an audit of the Fed in his financial reform package. This lack of support is important, since Bernanke [10] and Treasury Secretary Tim Geithner [11] have expressed their opposition to the audit proposal. Similarly, as Maloney's bill moves to the Senate, its prospects are unclear, although Sen. Mark Warner (D-VA), who is chair of the Budget Committee's new Government Performance Task Force, introduced a similar bill, [12] and should be a strong advocate for the proposal as it moves forward in that chamber.

While both bills are significant fiscal transparency measures, due to the Senate's current legislative backlog (health care reform and the appropriations bills will both take precedence), it is unlikely that Congress will pass either bill by the end of 2009.