Ron Paul is right: Audit the Federal Reserve bailout money

Rep. Ron Paul (R-Texas) has a bill with 300 sponsors that won’t pass, which is very unfortunate, but revealing. Let me suggest a variation that might pass, and would be extremely valuable:

Let’s begin with a complete audit of all bailout programs initiated by the Federal Reserve Board, the Federal Deposit Insurance Corporation and other relevant agencies.

This audit would be all-inclusive, from top to bottom. It would include zero- to low-interest loans and financing facilities. It would include federal purchases of any form of financial instrument that was initiated in response to the financial crisis. It would include all forms of business and loan guarantees and every other program that helped any financial institution respond to the crisis.

This would be an input-output audit. It would include accounting for every penny of the trillions of dollars spent in any aspect of the bailout. It would involve accounting for how the bailout money was spent, who received the bailout money and how recipient banks and Wall Street firms used the bailout money.

For example, if banks were given zero-interest capital from the Fed, and loaned that capital through credit cards at 30 percent interest, taxpayers have a right to know this. If banks were given huge sums of zero or low-interest capital, and did not loan that money as intended, and then used that money for speculation or excessive compensation, taxpayers have a right to know this, too.

In this input-output audit, we take the Ron Paul idea and apply it to those portions of Federal Reserve, FDIC and other agency policies directly tied to the bailout, and then we apply it to the recipients of that money, to determine how it was spent.

Financially this is rational and sound. Politically this should gain bipartisan support, especially uniting legitimate conservative and progressive populists and guardians of the taxpayers’ money. This is a reasonable and manageable proposal that would have a sweeping impact assuring transparency, integrity and fairness to taxpayers.