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Fed Audit Legislation Passed by House Oversight Committee

A U.S. House committee approved legislation introduced by Representative Ron Paul that would subject the Federal Reserve to an audit of its activities, including monetary policy decisions.

The House Oversight and Government Reform Committee in Washington approved the bill today in a voice vote. The bill now advances to consideration in the full House.

Paul, a Republican from Texas and author of the book “End the Fed” calling for the abolition of the central bank, seeks through the bill to require an audit by the Government Accountability Office of the Fed’s board of governors and 12 regional banks.

“The Federal Reserve is an independent central bank and that independence is critical to its ability to conduct monetary policy,” said Representative Elijah Cummings of Maryland, the senior Democrat on the committee. Passage of the audit legislation would mean “members of Congress could seek to influence the Federal Reserve’s deliberations.”

The bill is “anticipated to be voted on by the full House of Representatives” before lawmakers recess in August, Jeffrey Solsby, a spokesman for Representative Darrell Issa, a Republican from California and the committee chairman, said in a statement.

Paul’s audit bill passed the House in 2010 as part of an overhaul of U.S. financial regulation before being rejected by the Senate and by a committee of lawmakers negotiating details of the Dodd-Frank Act. Fed Chairman Ben S. Bernanke opposed the legislation, saying it would compromise the central bank’s independence in setting interest rates.

Emergency Aid

While rejecting Paul’s bill, Congress directed the GAO to audit the Fed’s emergency-aid programs during the financial crisis and review the system of directors of regional Fed banks for possible conflicts of interest. The Fed was also required to identify borrowers involved in its crisis-lending programs.

Since the Dodd-Frank law passed, Republicans won control of the House and narrowed Democrats’ majority in the Senate. Paul announced on May 14 that he would no longer spend money to compete in the Republican presidential primaries.

After passing committee, Paul’s legislation needs approval from both chambers of Congress and the president before becoming law.

To contact the reporter on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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