July 13 Daily News editorial

A House bill allowing the General Accounting Office to audit the U.S. Federal Reserve had collected 245 co-sponsors as of a week ago today. The bill’s primary sponsor, U.S. Rep. Ron Paul, must have felt vindicated. Transparency of the Fed has long been a signature issue for the Texas Republican. He first introduced legislation calling for increased scrutiny of the Federal Reserve 26 years ago. That initial bill picked up just 18 co-sponsors. Paul’s subsequent attempts haven’t done much better. Until now.

But last Monday Senate leaders shot down Paul’s so-called Federal Reserve Transparency Act. The Senate version of the bill was effectively killed and buried using a parliamentary procedure. A bill that had the support of most House members and looked to have a good shot at capturing a majority in the Senate was blocked on procedural grounds. It seems a lousy way to dispense with any legislation, good or bad. And this bill is more good than bad, in our view — and, apparently, that of most on Capitol Hill.

More transparency is a good thing for any organization involved in the public’s business. The Federal Reserve is and must remain an independent body, because monetary policy must be kept independent from politics. But the Fed is very much involved in the public’s business — more so at this time than ever before.

The Federal Reserve has taken a very active role in responding to the current recession, distributing trillions of dollars. The public has every right to know exactly how their money is being disbursed. Moreover, the Obama administration has given the Fed broader authority over the financial system. “If they give them a lot more power and there’s no more transparency, that’ll be a disaster,” Rep. Paul told FoxNews.com.

That may be an exaggeration. But there’s no arguing that the increased level of transparency Paul’s bill would impose on the Fed is somehow inappropriate or a threat to its independence. Allowing the GAO to conduct audits of the Federal Reserve would bring a measure of accountability that’s now lacking. That, ultimately, would be to the Federal Reserve’s benefit.

Operating largely in the shadows invites all manner of unfounded rumor and suspicion. The antidote for rumor and suspicion is more oversight. We believe regular GAO audits would serve to strengthen both the Federal Reserve and further public understanding of its important role in our monetary system. It appears that a majority in Congress share that belief. Neither the Fed nor the country were well-served by those congressional leaders who pulled out their bag of procedural tricks a week ago to derail Paul’s legislation.