Lawmakers Push Bill to Monitor Fed Lending Programs

(MoneyWatch)  The campaign to audit the Federal Reserve I wrote about in July has legs. Two lawmakers this week introduced a bill that would allow the Government Accountability Office to review the agency's programs for bailing out the financial industry.

"During this financial crisis, Federal Reserve credit contributed greatly to the stabilization of the system," said Sen. Jeff Merkley, D.-Ore., one of the sponsors of the Federal Reserve Accountability Act, in a statement. "In doing so, the Federal Reserve departed significantly from its traditional relationship with markets and took on unprecedented new risks. Such a significant change in the Federal Reserve's traditional activities demands responsible, robust oversight." Unlike more draconian legislation proposed in the House by Rep. Ron Paul, this measure is more of a nose in the room for those favoring congressional oversight of the Fed. The Texas Republican's bill would direct the OCC to audit the Fed Board of Governors and its reserve banks and report back to Congress.

Merkley's bill, which is co-sponsored by Sen. Bob Corker, R-Tenn., only proposes to let Congress sniff around the emergency lending programs. That's why it has a better chance of advancing than Paul's measure. While bashing the Fed makes for good sport these days, lawmakers are aware of the risks of politicizing the agency, which sets U.S. monetary policy.

More important, President Obama has the Fed's back. He has thrown his weight behind the agency as chief overseer to the financial industry and is certain to oppose (behind the scenes) efforts to subject it to congressional scrutiny.

I'm all for checks and balances. That said, can the Senate Banking Committee, on which both Merkley and Corker serve, and other congressional panels be counted on to watch the watcher?

If memory serves, this nation's lawmakers aren't exactly immune to the charms of special interests, such as the financial industry. Corker, for instance, has raised more money from financial, insurance and real estate interests than from any other sector (call it occupational hazard -- Merkley and Paul haven't exactly beaten off such donors, either).