Let's start off with a third party for a change of pace....
votenader.com
votenader.com
Congress Should Stand Up to the Fed
By Ralph Nader
February 15, 2000
The Federal Reserve has always acted as a separate
government. Normal checks and balances that apply to
other federal agencies are simply ignored by the Federal
Reserve Board.
The Board sets its own budget and operates off the
billions of dollars collected in buying and selling
government securities as part of its control of the money
supply. The spending is not even subject to a formal
Congressional review. With the exception of an
occasional perfunctory hearing, Congressional oversight is
largely a joke or non existent. Rather than probing the
operations of the Federal Reserve, hearings invariably
become contests to see which Member of Congress can
utter the most fulsome praise for the Fed and its current
Chairman, Alan Greenspan.
The Federal Reserve picks and chooses what laws it
follows. It claims, for example, that it is not subject to
the Civil Rights Act and the provisions of the Act which
outlaw job discrimination. In 1980, the Congress passed
the Monetary Control Act in an attempt to eliminate the
subsidies that the Federal Reserve was handing out to
commercial banks in the form of below market pricing of
check clearing and other services. The Fed processes
more than 17 billion checks annually, largely carried out
through a contract fleet of 53 airplanes.
Instead of changing its pricing system to comply with the
law, the Fed has engaged in some "creative bookkeeping"
and some less than straight forward explanations to
Congress in an attempt to obscure the subsidies.
A handful of Members of Congress and their staffs have
refused to fall for the Fed's flimsy explanations. They
believe that the Federal Reserve is continuing to thumb
its nose at the law and the clear intent of Congress that
services be priced at market value and the subsidies
ended for the banks.
During the mid 1990s former House Banking Chairman
Henry Gonzalez and his chief economist and Fed-tracker
extraordinaire, Dr. Robert Auerbach, conducted detailed
investigations which revealed "waste and fraud" in the
Fed's payment system. Among other things, the Gonzalez
report documented what it called "corrupted bidding
procedures," interference with competitors and
overcharging the U. S. Treasury for hauling its cleared
checks-all of which helped mask the subsidies. The report
cited, as well, cases of the Fed paying for "phantom
aircraft" and double paying for aircraft that the Federal
Aviation Administration had permanently grounded due to
falsified maintenance reports.
Fed officials tried to play down the report and portrayed
Gonzalez's findings as simply "differences of opinion about
management decisions." Despite this attempt to dust off
the report in public comments, the Fed behind the scenes
did make some limited internal changes in its check
transportation system. Now the Federal Reserve has
come up with a new scheme to maintain the fiction that
it is recovering the costs of the payment system, rather
than subsidizing the services in violation of the 1980
Monetary Control Act. The Fed is now transferring part of
the excess in its employees' pension funds to subsidize
the services. Dr. Auerbach, who is now a professor at the
University of Texas' Lyndon B. Johnson School of Public
Affairs, estimates that the Fed offset $87 million of the
payment system's costs in 1998 by using the pension
funds.
After learning of the pension fund gimmick, Senator Harry
Reid of Nevada quietly attached an amendment to last
year's financial modernization legislation which prohibited
the Fed?s use of pension fund money to balance the
books on the payment services.
But, the amendment was short-lived. During the
House-Senate conference, Fed Chairman Greenspan-who
appeared to serve an ex-officio member of the
conference-lobbied House Banking Chairman Jim Leach, a
long-time apologist for the Federal Reserve, to get rid of
the Reid amendment. Without any debate, recorded
votes or public announcement, the amendment suddenly
disappeared from the bill's text, leaving the Fed free to
continue to play with pension funds to hide payment
services subsidies.
The treatment of Reid amendment is the latest illustration
of how subservient the Congress is to the Federal
Reserve and how weak-kneed the Banking Committees
are in resisting pressure from Alan Greenspan. Congress is
letting the Monetary Control Act of 1980 become a nullity
and allowing the Federal Reserve to openly hand
government money to the banks in contravention of the
law. It is time for the voters to demand a Congress that
doesn't cave to the every whim of the Federal Reserve.
It is a disgrace when Congress cannot summon the
courage to see that the laws it passes-like the Monetary
Control Act of 1980-are carried out. No wonder that
Chairman Greenspan openly thumbs his nose at
Congressional oversight and operates the Fed as a
private preserve for the banks and Wall Street. |
