WASHINGTON — The Senate voted 96 to 0 on Tuesday to compel the Federal Reserve Board to reveal recipients of its emergency lending programs during the financial crisis, but rejected a more sweeping alternative that would have audited all central bank actions including monetary policy.
The compromise adendment from Sen. Bernie Sanders, I-Vt., on emergency lending was adopted into the financial regulatory reform legislation that is still being debated.
The amendment was significantly narrowed in scope — a previous Sanders amendment would have audited all Fed actions and could have extended into monetary policy decision-making activities — amid concerns from Senate Banking Committee Chairman Chris Dodd and Fed Chairman Ben Bernanke that it would influence monetary policy making.
"Last week a number of senators, Democrats and Republicans, indicated to me that they were uncomfortable with my original amendment, which they believed would have allowed Congress to be involved in the day-to-day monetary operations of the Fed," Sanders said on the Senate floor Tuesday. "That was never my intention and I still do not believe that the original amendment would have done that… Sen. Dodd indicated to me that if we could clarify this issue, he would not only be supportive of this amendment but he would co-sponsor it. That's exactly what he did and I very much appreciate his support."
A more sweeping substitute to audit all Fed activities from Sen. David Vitter, R-La., that mirrored language included in the House-passed regulatory reform bill from Republican Rep. Ron Paul, was rejected 62 to 37.
Vitter said he supported the Sanders amendment but did not feel it went far enough.
"I present this different amendment because Sen. Sanders decided to modify his amendment late last week and I thought there was a continuing need to have this language exactly as it now appears in the House bill," said Vitter on the Senate floor.
The Vitter measure would have required a full and complete audit, with a delay in auditing any monetary policy decision until transcripts of Fed board and Federal Open Market Committee meetings were released to the public.
Vitter said his amendment was needed to enable the public to continue to monitor Fed activities going forward. For example, he pointed to the central bank's engagement in the Greek debt crisis that is pummeling Europe as reason continued oversight is necessary.
"If we needed any reason to think we need this ability to continue to look forward and look at the detailed provisions of Fed activity, it's in the news right now, absolutely right now in terms of the Greek and European economic crisis," he said. "In the last few days the Fed has announced the opening of significant facilities to central banks in Europe that certainly involve it at least at the margins in that activity… Clearly they are significant events, clearly they are significant actions of the Fed and they are a perfect and very recent example of why we need to look at what the Fed is doing on an ongoing basis in detail."
The Sanders amendment would specifically require an audit of recipients of Fed assistance between December 2007 until the enactment of the legislation.
Sanders said his amendment would unveil the cloak of secrecy surrounding the Fed's actions.
"The Sanders amendment makes it clear that the Fed can no longer operate in the kind of secrecy that it has operated in forever," he said. "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 firms of those financial arrangements."
The provision would look at the operational integrity, accounting, financial reporting and internal controls of the Fed's credit facility. It would examine the effectiveness of the collateral policies in mitigating risk to the taxpayer and relevant Fed district banks, whether the credit facility inappropriately favored one or more specific participants over other institutions, the policies governing the use of third-party contractors and conflicts of interests.
It would also examine the system for appointing directors at the Fed district banks and whether they effectively represent the public. It would ask the GAO to consider whether there is a conflict of interest between the selections of directors by member banks. The study would require recommendations.
It would also require, starting in December, that the Fed post on its website all loans and other financial assistance under any of its emergency lending programs and credit facilities provided between December 2007 and enactment of financial reform.
Dodd said that the Sanders amendment was already making an impact. He said Bernanke said in a meeting Tuesday morning that the Fed would post details of its contracts with other central banks pertaining to the European debt crisis on the Fed website.