Below is a press release from Firedoglake about the Watt Amendment, which would gut the Paul-Grayson proposal to audit the Federal Reserve.

Economists and Labor Leaders Call for Fed to be Audited

Urge Rep. Barney Frank and Financial Services Committee to Reject Watt Amendment

Richard Trumka, Andy Stern, Jamie Galbraith, Naomi Klein Say “A vote for the Watt Amendment is a vote for more secret bailouts”

Leading economists, labor leaders. authors and bloggers today released a letter in support of the Paul-Grayson amendment,  proposed by Rep. Ron Paul of Texas and Rep. Alan Grayson of Florida, which calls for a complete audit of the Federal Reserve. The say that such transparency is necessary due to the many questions surrounding the Fed’s recent activities, and the “potential cronyism and favoritism in its distribution of many trillions of dollars.”

“The Watt amendment is a last-minute power play by the banks” says Jane Hamsher, founder and publisher of Firedoglake.com, who organized the effort. “It would actually make the Federal Reserve even more secretive, by erecting further barriers to transparency.”

The letter was signed by SEIU President Andy Stern, AFL-CIO President Richard Trumka, James K. Galbraith (Lloyd M. Bentsen, Jr., Chair at the LBJ School of Public Affairs, University of Texas at Austin), author Naomi Klein, blogger Yves Smith of Naked Capitlaism, William Black (Associate Professor of Economics and Law at the University of Missouri–Kansas City), blogger Tyler Durden of Zero Hedge, Robert Johnson (former Chief Economist of the US Senate Banking Committee), Randall Wray (Professor of Economics and Director of the Center for Full Employment and Price Stability at the University of Missouri–Kansas City), Thomas Ferguson, Professor of Political Science, University of Massachusetts, Boston and Dean Baker, co-founder and co-director of the Center For Economic And Policy Research.

Regarding the Watt Amendment, Ryan Grim of the Huffington Post wrote:

While Watt’s amendment talks a big game about opening up the Fed to a complete audit, all of the new powers granted must be carried out “each case in accordance with subsections (b) and (e).

Those subsections of the current law delineate the many restrictions that an auditor confronts when seeking to audit the Fed. Watt’s measure not only leaves those in place but requires all audits to abide by them.

And in addition to the current restrictions in place, it creates new ones. An auditor could not look at loans or liquidity arrangements the Fed enters into, the terms of those arrangements, or the effect of those loans and other liquidity deals on “reserves, the balance sheet or financial condition of a Federal reserve bank or the Federal Reserve System.”

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Text of the letter:

November 18, 2009

House Financial Services Committee
2129 Rayburn House Office Building
Washington, D.C.  20515

Dear Chairman Frank, Ranking Member Bachus, and Members of the Committee,

During the past two years, the Federal Reserve dramatically changed its operating procedures.  Instead of simply setting interest rates to influence macroeconomic conditions, it rapidly acquired a wide variety of private assets and extended massive secret bailouts to major financial institutions.

There are still many questions about the Fed’s behavior in these new activities, including potential cronyism and favoritism in its distribution of many trillions of dollars. As the Special Inspector General for the Troubled Assets Relief Program recently wrote about their bailout of AIG, the Fed’s “strategy to pursue concessions from counterparties offered little opportunity for success, even in light of the willingness of one counterparty to agree to concessions.”

The Federal Reserve balance sheet expanded to more than $2 trillion, along with implied and explicit backstops to Wall Street firms that could cost even more.  Who received the money? Against what collateral? On what terms  and conditions? The only way to find out is through a complete audit of the Federal Reserve.  That’s why we support the Paul-Grayson  amendment requiring a complete audit.

The Watt amendment does not repeal the existing provisions that prohibit a GAO audit of the Federal Reserve. In fact, it adds entirely new additional categories of restrictions. Instead of opening up the Fed’s secretive activities to public inspection, the Watt amendment cloaks it in further secrecy.

A vote for the Watt amendment is a vote for more secret bailouts.  We urge you to support Paul-Grayson instead.

Sincerely,

Dean Baker, Economist, Center for Economic Policy Research
William Black, Professor of Economics and Law
Tyler Durden, Blogger, Zero Hedge
Thomas Ferguson, Professor of Political Science, University of Massachusetts, Boston
James K. Galbraith, Economist, University of Texas
Leo Gerard, President, United Steelworkers Union
Jane Hamsher, Blogger, Firedoglake.com
Rob Johnson, Economist
Naomi Klein, Author, No Logo and The Shock Doctrine
Yves Smith, Blogger, Naked Capitalism
Andrew Stern, President, SEIU
Richard Trumka, President, AFL-CIO
L. Randall Wray, Professor of Economics, Center for Full Employment and Price Stability