Audit The Fed

There have been editorials regarding Congressman Ron Paul’s push to have the Fed audited like every other government department. The opinion was the Fed should be left independent. A little lesson is needed. The Fed was formed by the large banks for one reason – so they could become “too big to fail”. After the government had to borrow from one of those banks, bankers realized they too could fail. The Fed acts as a banker’s bank. They are the lender of last resort. They are also tied directly to the government since the Fed chairman is a political appointee.
The Fed is also tied to the government through the Treasury. The Treasury prints and distributes the money the Fed uses to raise or lower the money supply which determines interest rates and inflation.
The reason banks are not lending to small businesses is because they do not need to. Instead of investing in small businesses they decided to invest back in the government. The bank can borrow money from the Fed at zero interest (the current Fed Fund Rate) and buy a 10 year Treasury which pays 4.5% interest.
Rather than taking a risk with business loan they can get a guaranteed 4.5%. Did you notice the 4.5% is being paid by the same people that loaned them the money in the first place? Did you also notice that 4.5% is being paid with tax dollars and is being added to the national debt?
Did you question how GM could pay back their TARP money while still not making a profit? They borrowed money directly from the Fed to pay back the Treasury. That’s like paying your Mother back with money from your Dad. They still don’t have the money but you got to use it.
That’s why Ron Paul’s bill should have the support of all taxpaying Americans. Where is that transparency we were promised?