Saturday, June 13, 2009

The Fed -- like Fannie and Freddie -- is above the law

I am definitely not one of Ron Paul's fans*, but his bill to audit the Federal Reserve seems a sensible one. Especially after reviewing this testimony before Congress by Elizabeth A. Coleman.

Coleman is the Inspector General of the Federal Reserve. The Fed, a private company with close political ties to the U.S. government (Fannie and Freddie, anyone?), appears to answer to no one.

# Alan Grayson: Thank you very much, Mr. Chairman. Inspector Coleman, you’re the Inspector General for the Federal Reserve, right?

# Elizabeth A. Coleman: That’s correct.

# Alan Grayson: Okay. Have you done any investigation concerning the Federal Reserve’s role in deciding not to save Lehman Brothers, which led to shockwaves that went through the entire financial system?

# Elizabeth A. Coleman: In that particular area, you know, I don’t feel like to comment on specific investigations, but we do not currently have an investigation in that particular area.

# Alan Grayson: All right, what about the $1 trillion-plus expansion of the Federal Reserve’s balance sheet since last September?

# Have you conducted any investigations regarding that?

# Elizabeth A. Coleman: Well, right now, we have a… we call it a review and with the term investigation, we have different connotations.

# We’re actually conducting a fairly high-level review of the various lending facilities collectively, which would include, you know,

# the TOWS, the variety of the different programs that are in process, so we’re looking at them at a fairly high level to identify risks.

# Alan Grayson: Well, I understand that, but we’re talking about events that started unfolding eight months ago.

# Have you reached any conclusions about the Fed expanding its balance sheet by over a trillion dollars since last September?

# Elizabeth A. Coleman: We have not yet reached any conclusions.

# Alan Grayson: Do you know who received that money?

# Elizabeth A. Coleman: For the… we are in the process right now of doing our review and…

# Alan Grayson: Right, but you’re the Inspector General. My question specifically is

# do you know who received that $1 trillion-plus that the Fed extended and put on its balance sheet since last September.

# Do you know the identity of the recipients?

# Elizabeth A. Coleman: I do not know. We have not looked at that specific area at this particular point on those reviews.

# Alan Grayson: (AUDIBLE SIGH)

# Alan Grayson: What about Bloomberg’s report that there are trillions of dollars in off-balance sheet transactions that the Federal Reserve has entered into since last September?

# Are you familiar with those off-balance sheet transactions?

# Elizabeth A. Coleman: You know, I think it may be important at this point to, just to bring up a certain aspect related to our jurisdiction and just to clarify perhaps some of my earlier comments.

# We are the Inspector General for the Board of Governors and we have direct oversight over Board programs and operations

# and we’re also able to look at Board-delegated functions to the Reserve Banks, as well as the Board’s oversight and supervision of the Reserve Bank.

# We do not have jurisdiction to directly go out and audit Reserve Bank activities specifically.

# Nevertheless, in our lending facility projects, for example, we are looking at the Board’s oversight over the programs and to the extent that it extends out to the Federal Reserve Bank of New York.

# Alan Grayson: Well, I have a copy of the Inspector General Act here in front of me and it says among other things that if you’re responsible,

# you can conduct and supervise audits and investigations relating to the programs and operations of your agency.

# Elizabeth A. Coleman: That’s correct.

# Alan Grayson: So I’m asking you if your agency has in fact, according to Bloomberg, extended $9 trillion in credit,

# which by the way works out to $30,000 for every single men, women, and child in this country. I’d like to know if you’re not responsible for investigating that, who is?

# Elizabeth A. Coleman: We, actually… we have responsibility for the Federal Reserve’s programs and operations, to conduct audits and investigations in that area.

# In terms of who is responsible for investigating… would you mind repeating the question one more time?

# Alan Grayson: What have you done to investigate the off-balance sheet transactions conducted by the Federal Reserve, which according to Bloomberg now?

# Elizabeth A. Coleman: I’ll have to look specifically at that Bloomberg article. I’m not… I don’t know if I have actually seen that particular one.

# Alan Grayson: That’s not the point. The question is have you done any investigation or auditing of off-balance sheet transactions conducted by the Federal Reserve?

# Elizabeth A. Coleman: At this point, we’re conducting our lending facility project at a fairly high level

# and have not gotten to a specific level of detail to really be in a position to respond to your question.

# Alan Grayson: Have you conducted any investigation or auditing of the losses that the Federal Reserve has experienced on its lending since last September?

# Elizabeth A. Coleman: We are still in the process of conducting that review. Until we actually, you know, go out and gather the information, I’m not in a position to really respond to this specific question.

# Alan Grayson: So are you telling me that nobody at the Federal Reserve is keeping track on a regular basis of the losses that it incurs on what is now a $2 trillion portfolio?

# Elizabeth A. Coleman: I don’t know if… you’re telling me that there’s… you’re… missing… that there are losses.

# I’m just saying that we’re not… until we actually look at the program and have the information, we are not in a position to say whether there are losses or to respond in any other way to that question.

# Alan Grayson: Mr. Chairman, my time is up, but I have to tell you honestly, I am shocked to find out that nobody at the Federal Reserve including the Inspector General is keeping track of this.

# Mr. Chairman: All right.

Yes, sir: nobody at the Federal Reserve is keeping track on a regular basis of the losses that it incurs on what is now a $2 trillion portfolio.

Feel better?

*A word about Ron Paul: Paul's supporters include an eclectic group of 9/11 Troofers, virulent racists, anti-Semites, and a host of other nutcases who are out to undermine the GOP and surreptitiously assist the Obama-Pelosi-Reid Democrats. Paul is, as all sensible people know, unelectable. In short, supporting Paul helps Obama and the rest of the Democrat-Statists.

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