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senate Bill S. 148

Audit the Fed: Does Congress Need a Review of the Federal Reserve's Operations?

Argument in favor

The Federal Reserve system is a mystery to the majority of Americans, but it plays an absolutely integral role in the U.S. economy. An audit would shed some light on a veiled part of our banking system.

Argument opposed

The Federal Reserve system already goes through audits, and it's making strides towards being more transparent. An audit initiated by Congress will lead to increased political influence on the Fed's policies.

bill Progress

  • Not enacted
    The President has not signed this bill
  • The house has not voted
  • The senate has not voted
      senate Committees
      Committee on Banking, Housing, and Urban Affairs
    IntroducedJanuary 16th, 2019

What is Senate Bill S. 148?

This bill — frequently referred to as the "Audit the Fed" bill — would direct the Comptroller General of the Government Accountability Office (GAO) to audit the Federal Reserve System's Board of Governors and the Federal Reserve Banks within 12 months of this bill’s enactment. The GAO would then submit  a detailed report of the audit’s findings and conclusions to Congress within 90 days of the audit’s completion.

The Federal Reserve system is in charge of controlling the U.S. money supply

Past limitations on audits of the Federal Reserve would be repealed by this bill.

This bill's full, official title is the Federal Reserve Transparency Act of 2019.


GAO auditors, consultants, the Federal Reserve system, and Congress.

Cost of Senate Bill S. 148

A CBO cost estimate is unavailable.

More Information

In-Depth: Sen. Rand Paul (R-KY) reintroduced this bill from the 115th Congress to enforce greater accountability for the Federal Reserve and prevent the Fed from concealing vital information about its operations from Congress:

“Audit the Fed is a grassroots-driven movement that has rattled the establishment and proven time and again the difference concerned Americans can make against the odds. It’s time for Congress to respond by passing this bill to hold the secretive Federal Reserve, the enabler of Washington’s spending addiction, accountable to the people’s representative."

Former Chairwoman of the Federal Reserve — Janet Yellen — fought attempts to audit and externally review how the Fed makes its decisions, for fear that it would “politicize monetary policy.” She went on record saying “I want to be completely clear, I strongly oppose Audit the Fed.”

Sponsoring Sen. Rand Paul (R-KY) disagrees, and said the following when he introduced this bill during the 114th Congress. 

“A complete and thorough audit of the Fed will finally allow the American people to know exactly how their money is being spent by Washington. The Fed currently operates under a cloak of secrecy and it has gone on for too long. The American people have a right to know what the Federal Reserve is doing with our nation’s money supply.”

Writing for the Wharton Public Policy Initiative blog, University of Pennsylvania students Adarsh Battu, Kamilia Stravreva, and Marc Klinger argued that this bill would harm the economy: 

"The 'Audit the Fed' bill poses a non-trivial threat to US economic growth and stability in light of [research showing] that 'increased central bank independence tends to improve inflation performance' and 'high inflation adversely affects real activity in subsequent years.' Independent accounting firms and government agencies currently audit the fed rigorously. Senator Paul’s bill does not enhance this oversight meaningfully. Instead, the bill enables Congress to intervene with monetary policy and overrule the Fed’s decisions. This intervention would significantly reduce the Fed’s statutory independence. A well-developed literature of economic research suggests this reduction could lead to excessive inflation overtime and hinder long-run economic growth. Therefore, the Audit the Fed bill should be abandoned. Monetary policy should remain well-insulated from voters and their representatives."

The Federal Reserve Board, the 12 Federal Reserve banks, and the Federal Reserve system as a whole are all subject to audits by the Government Accountability Office (GAO). The financial statements of the banks and the system in its entirety are audited by the Office of the Inspector General, which also investigates the Federal Reserve's operations. But current oversight has been deemed insufficient by some who want broader insight into the Federal Reserve's activities, despite fierce resistance.

This bill has eight Republican Senate cosponsors in the 116th Congress. A House version of this bill, introduced by Rep. Thomas Massie (R-KY), has 69 bipartisan cosponsors, including 68 Republicans and one Democrat.

Last Congress, Sen. Paul and Rep. Massie each introduced this bill in their respective chambers of Congress. Rep. Massie's House bill, which had 114 bipartisan cosponsors, including 109 Republicans and five Democrats, passed the House Oversight and Government Reform Committee by a voice vote but didn't receive a full House vote. Sen. Paul's Senate bill, which had 16 Republican cosponsors, didn't receive a committee vote.

This bill has been introduced in multiple Congresses, progressing the farthest in the 114th Congress. In that session, a bipartisan Senate majority passed it by a 53-44 vote. It has also passed the House by bipartisan majorities in multiple Congresses.

Of Note: Since 1977, the Federal Reserve has operated under what is known as the 'dual mandate' which sets its goal as maximizing employment, while supporting stable prices (avoiding inflation), and maintaining moderate long-term interest rates.

In order to accomplish these goals, the Federal Reserve has three tools at its disposal:

  • Open Market Operations, which directly affect the money supply, include the buying and selling of U.S. Treasury bonds to influence the interest rate up or down — whichever is more desirable given economic conditions. When the Federal Reserve buys bonds, the money supply grows and interest decreases. Conversely, when it sells bonds, the money supply shrinks and interest rates rise.
  • Changes in the discount rate, i.e. the interest rate that Federal Reserve Banks charge depository institutions for short-term loans.
  • Modifying the reserve requirements for depository institutions — which is the ratio of reserves to deposits those institutions are required to maintain in their vaults or on deposit at a Federal Reserve Bank.

In general, if the economy is growing rapidly and there are concerns about inflation rising to a level that erodes consumers purchasing power, the Federal Reserve might raise interest rates and shrink the money supply. It can also attempt to rein in the availability of credit through reserve requirements and the discount rate.

On the flip side, if the economy is in recession or sluggish, the Federal Reserve will attempt to broaden the money supply and lower interest rates to encourage economic growth. Meanwhile it can make credit more available to businesses and consumers by easing reserve requirements.

There are several areas where Federal Reserve critics express their concerns. Free-market activists disagree with Federal Reserve's role in managing the economy. They argue that its manipulations distort interest rates from the market's true equilibrium — leading to 'bubbles' and over-investment. They point to examples like the dot-com bubble or the subprime mortgage bubble

Other critics point to Fed policies that they say help fuel economic inequality, wherein the wealthy see their assets grow at a faster rate, while the average person's income remains stagnant. Former Federal Reserve Chairman, Ben Bernanke, isn't persuaded by those claims — he believes that remedying inequality isn't an attainable goal of monetary policy (other than through job creation). He also foists the blame onto other long-term structural causes of economic inequality like globalization, demographics, and technological progress.


Summary by Eric Revell
(Photo Credit: / pabradyphoto)


Federal Reserve Transparency Act of 2019

Official Title

A bill to require a full audit of the Board of Governors of the Federal Reserve System and the Federal reserve banks by the Comptroller General of the United States, and for other purposes.

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