WASHINGTON -- Senator Chuck Grassley today won Senate passage of his amendment to give the independent auditing arm of Congress the authority to access information from the Federal Reserve about its bailout and financial stabilization efforts.
Grassley said "my amendment has nothing to do with the Fed's independent role in conducting monetary policy but is an important reform for holding the entities involved in the massive taxpayer-funded economic bailout accountable to the public."
Senators voted 95 to 1 for Grassley's initiative to increase transparency in government.
Grassley's amendment (#1021, as modified, to S.896) gives the Government Accountability Office – the GAO – authority to audit actions taken by the Federal Reserve under its emergency powers to aid a specific private firm, such as its actions to assist J.P. Morgan Chase's purchase of Bear Stearns, provide financing for Bank of America and Citibank, and its various actions taken to stabilize American International Group (AIG).
The text of the amendment is posted here. Below is Grassley's floor statement about the amendment.
Earlier today, Grassley and Senator Max Baucus won unanimous Senate approval for a separate bipartisan amendment to the pending housing bill to give GAO access to information from participants in the federal Trouble Assets Relief Program – the TARP – about how they are using the bailout dollars.
Floor statement of U.S. Senator Chuck Grassley of Iowa
GAO Access Amendment (Federal Reserve)
Wednesday, May 6, 2009
In March, the Finance Committee held a hearing on the progress and oversight of the Troubled Assets Relieve Program (TARP). At that hearing the Government Accountability Office (GAO) testified that it's not just firms who take taxpayer money under TARP who can say "no" to GAO's requests for information (prior to my other amendment on this bill). The Federal Reserve can also refuse to cooperate.
The GAO's ability to audit the Federal Reserve is restricted by law. Perhaps those restrictions could be defended back when the Federal Reserve focused only on monetary policy. However, today it is routinely exercising extraordinary emergency powers to subsidize financial firms far above the levels Congress is willing to authorize through legislation. The Federal Reserve is taking on more and more risk in complicated and unprecedented ways. That risk is ultimately borne by the American taxpayer.
Congress authorized $700 billion in funds under TARP. However, the total projected assistance in various initiatives by the Federal Reserve could be up to $3.4 trillion by GAO estimates.
This modified version of the amendment does not give GAO authority to look at all of that additional taxpayer risk. It is much narrower than the one I originally filed, but it is a reasonable step in the right direction, and it does not threaten monetary policy independence.
Although I would have preferred to include all of the Fed's emergency actions under 13(3), in consultation with Senator Shelby I agreed to limit my amendment to actions aimed at specific companies. I would like to submit for the record a list of those actions currently covered by the new language, according to Federal Reserve staff. Future actions of the same sort would also be subject to GAO audit.
The goal of this amendment is extend GAO authority to cover the Federal Reserve's emergency actions that are most similar to the TARP—in other words actions aimed at specific companies like Bear Stearns and AIG.
I appreciate the support of Senators Shelby and Dorgan who are co-sponsoring this amendment. I urge my colleagues to support Amendment #1021. Let's not give GAO an important mission to do with a blind fold on. Let's take off the blindfold get a good hard look at what the Federal Reserve is doing.
For the Record:
According to Federal Reserve staff, the following is a list of 13(3) emergency actions Covered by the "single and specific" language of Amendment #1021 to S. 896:
1. Actions related to Bear Stearns and its acquisition by JP Morgan Chase, including:
a. Loan To Facilitate the Acquisition of The Bear Stearns Companies, Inc. by JPMorgan Chase & Co. (Maiden Lane I)
b. Bridge Loan to The Bear Stearns Companies Inc. Through JPMorgan Chase Bank, N.A.
2. Bank of America -- Authorization to Provide Residual Financing to Bank of America Corporation Relating to a Designated Asset Pool (taken in conjunction with FDIC and Treasury)
3. Citigroup -- Authorization to Provide Residual Financing to Citigroup, Inc., for a Designated Asset Pool (taken in conjunction with FDIC and Treasury)
4. Various actions to stabilize American International Group (AIG), including a revolving line of credit provided by the Federal Reserve as well as several credit facilities (listed below). AIG has also received equity from Treasury, through the TARP, which would also be captured in amendment #1020.
a. Secured Credit Facility Authorized for American International Group, Inc., on September 16, 2008
b. Restructuring of the Government's Financial Support to American International Group, Inc., on November 10, 2008 (Maiden Lane II and Maiden Lane III)
c. Restructuring of the Government's Financial Support to American International Group, Inc., on March 2, 2009
5. TALF -- finally, amendment #1020 would expand GAO's authority to oversee the TARP, including the joint Federal Reserve-Treasury Term Asset-Backed Securities Loan Facility (TALF)
*Neither* Amendment #1021 nor #1020 would include short-term liquidity facilities:
1. Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility
3. Commercial Paper Funding Facility (CPFF)
4. Money Market Investor Funding Facility (MMIFF)
5. Primary Dealer Credit Facility and Other Credit for Broker-Dealers (PDCF)
6. Term Securities Lending Facility (TSLF)