In a previous article, I discussed the push to audit the Federal Reserve System. Since that time, Congress has made major progress in bringing about a transparent central bank. Now, the Federal Reserve Transparency Act of 2009 (H.R. 1207) has more than 300 co-sponsors in the House, and efforts have been made to gut the legislation and protect the central bank from any significant audit of its practices.

Currently under the United States Code, the Fed is exempt from audit regarding “(1) transactions for or with a foreign central bank, government of a foreign country or nonprivate international financing organization; (2) deliberations, decisions, or actions on monetary policy matters (3) transactions made under the direction of the Federal Open Market Committee; or (4) a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to clauses (1)-(3) of this subsection,” or, as I like to put it: everything they do. H.R. 1207 removed exceptions one through four and opened the Fed to audits of all their dealings.

When the bill was referred to the House Domestic Monetary Policy and Technology Subcommittee, the language was weakened by Chairman Mel Watt, D-N.C. Watt, who has received more than $200,000 from the commercial banking industry since he entered Congress, stripped the bill of all sections allowing for an audit, leaving only a hollow call for Fed transparency. It is unlikely that Watt, whose district has been gerrymandered such that he could be caught with a goat and still be re-elected, has been receiving very many calls from his constituents demanding a completely secret central banking system. Therefore, it is probable that Watt has other interests in mind when he prevents Federal Reserve transparency from becoming a reality.

The Federal Reserve is regarded by the Austrian School of Economics to be the engine of the business cycle. In a theory promoted by Austrian economists such as Freidrich von Hayek and Ludwig von Mises, the Fed causes the business cycle by setting the interest rate lower than the natural rate dictated by the market. This deludes producers into believing there are more savings in the economy than truly exist and causes them to take excessive risks to produce more than could possibly be consumed.Consequently, producers have to take major losses and retract their projects. Furthermore, the Fed’s inflationary monetary policy, agreements with foreign nations and collusion with large banks affect everyone. The Federal Reserve is a creature of Congress, and therefore, it is the right of the people to know what the Fed is up to.

There are concerns, of course, about preventing sensitive financial information from being released immediately. For this reason, the author of the bill, Congressman Ron Paul, has agreed to a time lapse between Fed action and an audit. This compromise is fair, and there is no reason why the American people cannot have full transparency in their central bank after such precautions have been added. The United States has now come the closest to Federal Reserve transparency since its mysterious inception on Jekyll Island 96 years ago. The more the Fed resists these efforts, the more reason we have to believe they have something to hide.

Philip is a sophomore in Arts & Sciences. He can be reached via e-mail at pchristofanelli@hotmail.com.