Federal Reserve

Economics Economics Questions
1

Are the Federal Reserve System and Reserve Banks ever audited?

The Board of Governors, the Federal Reserve Banks, and the Federal Reserve System as a whole are all subject to several levels of audit and review. Under the Federal Banking Agency Audit Act (enacted in 1978 as Public Law 95-320), which authorizes the Comptroller General of the United States to audit the Federal Reserve System, the Government Accountability Office (GAO) has conducted numerous reviews of Federal Reserve activities. In addition, the Board’s Office of Inspector General (OIG) audits and investigates Board programs and operations as well as those Board functions delegated to the Reserve Banks. Completed and active GAO reviews and completed OIG audits, reviews, and assessments are listed in the Board’s Annual Report (before 2002, the reviews were listed in the Board’s Annual Report: Budget Review).

The Board’s financial statements, and its compliance with laws and regulations affecting those statements, are audited annually by an outside auditor retained by the OIG. The financial statements of the Reserve Banks are also audited annually by an independent outside auditor. In addition, the Reserve Banks are subject to annual examination by the Board. The Board’s financial statements and the combined financial statements for the Reserve Banks are published in the Board’s Annual Report.

I’ve got a question on why Rothbard says that the fed is accountable to no one yet they are audited it seems. Also they are forced to report to congress twice a year thats why im puzzled my rothbards statements.

2

They report to Congress and go through governmental audits but they aren’t directed in their monetary policies in any way by outside entities.

If they step outside of the law Congress can bitchslap them but they can’t tell them to lighten up on the money supply because they want the numbers to look good around election time or even, it would appear, have any say in who they lend money to.

I was listening to some random economist on the public radio a couple days ago who called them ‘the fourth branch of government, subject to no checks and balances’ or something to that effect. Actually, I believe he was a former secretary to the treasury – I remember now since he said that hindsight is 20/20 and nobody could predict the troubles in the credit markets beforehand when the fine scholars around here have been ringing the warning bell for at least a year or two before the ‘subprime crisis’ hit. Almost threw something through the windshield on that one…

3

That seems reasonable. While the fed is accountable to congress it doesn’t mean anything because of the fear of inside lag which according to statists comes from political pressure and etc. So they have the power to remove them from the fed but they aren’t really accountable if the legislative branch believes they should have power thats seperate from political pressure. You basically are giving them unlimited power at that point.