Weekly Audit: Time to Audit the Fed

By Zach Carter, Media Consortium Blogger

Two key lawmakers on the House Financial Services Committee, Reps. Alan Grayson (D-FL) and Ron Paul (R-TX), are pushing to authorize a full, comprehensive audit of the Federal Reserve. The plan has sparked fury from both the Fed and the corporate banking industry, but the proposal is so appealing that the controversy is almost laughable.

The Federal Reserve is one of the most powerful economic institutions in the world, but most of its operations are conducted in total secrecy. The Fed's rescue activities have dwarfed the $700 billion Troubled Asset Relief Program, but without any public accounting. Some of these efforts may have been entirely appropriate, but we don't even know who the Fed is helping. That fact is a major barrier to establishing effective and fair economic policy.

As Glenn Greenwald observes for Salon:

"The Fed is a typical Washington institution that operates un-democratically and in virtually total secrecy, and a Congressionally-mandated audit that they (and much of the DC establishment) desperately oppose would be a serious step towards changing the dynamic of how things function. At the very least, it would provide an important template for defeating the interests which, in Washington, almost never lose."

Under the Grayson-Paul plan, which is offered as an amendment to the Financial Stability Improvement Act of 2009, the Government Accountability Office would be given the authority to audit all of the Federal Reserve's activities, just as it can audit other public programs and institutions.

Last week, the House Financial Services Committee approved the audit-the-fed bill, despite opposition from panel Chairman Barney Frank (D-MA), who tried to gut the plan. Even on the Financial Services Committee, where the banks concentrate their campaign contributions, Grayson was able to convince 14 other Democrats to stand up to the financial establishment.

The vote of approval scarcely registered on mainstream media's radar, and even then, the Grayson-Paul legislation was portrayed as an assault on the Fed's "political independence." As Dean Baker notes for Talking Points Memo, it's hard to see how a simple, public accounting can be construed as a political hit on the Fed's policy-making.

By setting interest rates, the Fed has enormous power to do almost anything under the economic sun, from fueling quick growth to destroying jobs. All of these powers have useful functions under the right circumstances, and we really don't want Congress to make decisions about the economy based on the interests of powerful lobby groups. The Grayson-Paul bill wouldn't do anything of the sort. As John Nichols explains for The Nation, audits of sensitive economic policy decisions would be subject to a six-month lag before they could be publicly released. If the Fed needs to act fast, Congress won't be able to get in its way. The public will eventually know how its own money is being spent, however, and learn how a public institution is conducting itself.

"In other words, this is about simple transparency, which everyone should favor," Nichols writes.

The White House and the Congressional Democratic leadership need to support a full and comprehensive audit of the Federal Reserve. It's an issue of basic democratic accountability. There is no good reason why economic policy should be conducted in secret.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

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Weekly Audit: Unemployment Fueling Political Storm

By Zach Carter, Media Consortium Blogger

Unemployment figures in the U.S. are staggering: The official rate stands at 10.2%, the highest in 26 years. A broader measure that includes people who are involuntarily working part-time or who have given up looking for work is at 17.5%. That's a full-blown economic emergency.

But, as Joshua Holland explains for AlterNet, President Barack Obama's response to the unemployment crisis has not matched the urgency of his response to the crisis on Wall Street. This isn't just unfair, it's bad economics.

"It's important to understand that the economic crisis in which we find ourselves is not just a function of a shaky financial system but of a crash in consumption that's come along with the evaporation of $14 trillion worth of the wealth of American families," Holland writes.

Widespread joblessness can be every bit as damaging to the economic structure as a financial crisis. When people are out of work, they buckle down on household expenses. When several million people cut back at the same time, the economic machine grinds to a halt. If people are not buying and selling stuff, the economy isn't working.

As Mary Kane explains for The Washington Independent, about 40% of families don't have enough money to cover expenses through a three-month stretch of unemployment--even if one member of the household is receiving unemployment benefits. Kane highlights a Brandeis University study that reveals the haggard state of the American household and the unfair distribution of wealth along racial lines. A full 66% of African-American and Latino families can't afford three months without work. At a time when 5.6 million workers have been jobless for at least six months, the study highlights just how dire finances have become for many households.

GRITtv's Laura Flanders discusses potential labor market remedies with economist Dean Baker and The Nation's John Nichols. Baker suggests a work-share arrangement, in which employers cut back on their workers' hours to allow more people to work. To prevent losses for households, the government would step in and pay for the shortfall in hours. Employers would have more part-time jobs available, but the government would make sure everyone was paid as if they were working full-time. Baker also endorses a public jobs program, which he says could be especially useful in cities like Detroit and Cleveland that have been hit particularly hard by the economic downturn.

Nichols highlights the political consequences of failing to fix the unemployment mess. Unemployment directly affects the lives of voters. If widespread joblessness persists through November 2010, Democrats will net huge Congressional losses. If Obama thinks it's hard to garner bipartisan support for his legislative priorities now, imagine a few dozen more Republican obstructionists.

It's not that Obama failed to respond to the unemployment crisis. He did. That's what the stimulus package was all about. Today's 10.2% unemployment is a catastrophe, but it would be more like 12% without the stimulus package. But, given the seriousness of the issue, Obama is not giving unemployment enough attention.

In fact, Obama's economic priorities are a mirror-image of his campaign promises, as Robert Scheer argues in both a column for TruthDig and an interview with Amy Goodman on Democracy Now! After talking tough about reining in recklessness on Wall Street and making the financial system more accountable, Obama has hired many of the very policy makers who pushed through the deregulatory agenda back in the 1990s. Top Obama administration officials like Larry Summers, Timothy Geithner, Gary Gensler and Neal Wolin helped make this mess in the first place.

"This is not a minor criticism," Scheer says. "I think the guy is betraying his own presidency."

Obama's timid efforts to rein in Wall Street and heal the ailing job market are setting the stage for a political disaster. If Obama and Congressional Democrats can't take strong action to fix the economy, they will find themselves with much narrower majorities next November. The economy, and the public institutions that support it, are supposed to work for everyone, not just the financial elite.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

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Alan Grayson, 2010 and smart fundraising.

Let me begin by saying that I agree with nearly everything that Congressman Grayson said and agree particularly with his comments that House Republicans are Neanderthals. I agree that someone who stands up and defines the Republican House Caucus for exactly what they are is an incredibly valuable thing. But at the same time I worry about campaign giving which depends almost completely on emotional response and which then leaves the donor nearly powerless over what happens to that money and which does nothing to solve what at this moment is the Democrats current biggest problem when it comes to the 2010. It is also important to look into the facts which surround every race, from the money dumped on Congressman Grayson, or Rob Miller who is challenging Joe Wilson in South Carolina's second district.

For instance, what percentage of Congressman Grayson's donors knew that he is a massive self-funder who gave himself more than three million dollars for his 2008 race.  This does not automatically mean he should be forced to self-fund forever, or that he isn't worthy of donations, but it does raise the question  at least slightly.  

When the money simple rains onto incumbents it distorts the system. It is more than likely that amongst the something like 100 democratic candidates running in either  open seats or challenging incumbent Republicans there is another Alan Grayson, or Carol Shea-Porter , or David Loebsack  who given the nature of the race they are running, are only that 100k, or so away from being for real.

As a first step, might I suggest to Congressman Grayson, that in response to the outpouring he has received his campaign committee goes out and finds ten strong house challengers who are progressive champions  and gives them the maximum allowed by law. This will run him at most half, of what he has raised from the progressive blogosphere and will strengthen his influence far more than simply keeping it for more television ads in his own district. If he announces those ten, we can have a multiplier effect, and truly strengthen our hand. It isn't perfect, but it is a start.  

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Grayson on Republicans Healthcare plan

Yea, its partisan. And when the only ones you piss off by telling the truth are the likes of bloggers going by the names of WearingFool and AllahPundit, do nothing but offer some cheese to the whiners. Everyone knows that there is not a lick of principle in the Republicans stance against having a public option for the American people. In fact, every single one of the Republican politicians, and their staff, are on a government-run healthcare plan. I've not read anything about any of them not accepting it as a matter of principle either.

To the state of passing healthcare reform-- how to make sense of the conflicting headlines this AM?

We know that Republicans want to kill the public option plan. And there are a number of Democratic Senators who, though they campaigned for concepts like universal healthcare, are now voicing against voting for something similar. Here's what to notice:

Harkin says there are over 50 votes for the public option.

The Democrats have 60 votes to bring about cloture.

Now, I'll take Harkin at his word, and I think its likely so too. The big question then is: would any Democrat not vote to bring about cloture for the up-or-down vote to happen?

I would consider such a thing tantamount to mutiny. Is there a precedent for such a thing happening?

Jonathan Cohn's article on What Rockefeller Understands nails it:

The arguments you hear in the debate are mostly about costs, payment rates, and how best to make a market function. But for Rockefeller, it really boils down to a simple proposition: A public plan is good because you know it will always be there for you.
That's the big picture. If a government-run healthcare plan works good enough for Republican politicians and their staff in DC, it's good enough for America.

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Orlando Sentinel Goes After Alan Grayson

Via Orlando Weekly comes news that the editorial page of the city's major paper, the Orlando Sentinel, is going after freshman Democratic Congressman Alan Grayson.

[T]he Orlando Sentinel published [an] opinion piece this weekend called "The health-care debate deserves and honest forum" under the auspices of its "New Voices" demographic olive branch: "a forum for readers under 30." Sure, fine, this is where young upstarts are meant to bloviate for 600 words or so about current events that they typically have no control over, because, well, their hair isn't graying yet. It's a harmless bit of Weekly Reader-dom designed to assuage a certain segment of the ad-perusing public and give "power" to the "kids." Harmless.

The problem with this Sept. 5 piece, located on page A19, was that it didn't really appear out of the thin air of youthful concern, but rather out of the the typing fingers of a known Republican operative, Kristen Soltis. Soltis -- as it is partially pointed out in print, but not online -- is the director of policy research for the conservative Winston Group in Washington D.C., and also former intern for the National Republican Congressional Committee who has been known to blog. Sure, she came up in these parts -- "I was born and raised in Orlando, graduated from Cypress Creek High School and the University of Florida, and moved to the nation's capital after college," she writes, "... to see how policy is made and change, implemented" -- but even from D.C. she feels herself qualified to comment on the nasty Democrat-"stacked" health-care town hall held by U.S. Rep Alan Grayson, D-Orlando, last month at that grimy union hall. Health care reform is bad! Democrats are evil! She wasn't there. She isn't even a registered voter in Orange County. She is, therefore, a young expert.

It's fine for an editorial board to make space for critics of elective officials. Indeed, one might even argue that that's exactly what editorial boards should be doing. But for an editorial board to give the political opponents of elective officials the opportunity to attack without full disclosure of the position of these writers raises some serious questions.

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