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112th Congress                                            Rept. 112-607
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================



 
                FEDERAL RESERVE TRANSPARENCY ACT OF 2012

                                _______
                                

                 July 17, 2012.--Ordered to be printed

                                _______
                                

   Mr. Issa, from the Committee on Oversight and Government Reform, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 459]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Oversight and Government Reform, to whom was 
referred the bill (H.R. 459) 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 before the end of 2012, and for other purposes, having 
considered the same, report favorably thereon with amendments 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Committee Statement and Views....................................     2
Section-by-Section...............................................     4
Explanation of Amendments........................................     5
Committee Consideration..........................................     5
Application of Law to the Legislative Branch.....................     5
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     5
Statement of General Performance Goals and Objectives............     5
Federal Advisory Committee Act...................................     6
Unfunded Mandate Statement.......................................     6
Earmark Identification...........................................     6
Committee Estimate...............................................     6
Budget Authority and Congressional Budget Office Cost Estimate...     6
Changes in Existing Law Made by the Bill, as Reported............     7
Minority Views...................................................    10

  The amendments are as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Federal Reserve Transparency Act of 
2012''.

SEC. 2. AUDIT REFORM AND TRANSPARENCY FOR THE BOARD OF GOVERNORS OF THE 
                    FEDERAL RESERVE SYSTEM.

  (a) In General.--Notwithstanding section 714 of title 31, United 
States Code, or any other provision of law, an audit of the Board of 
Governors of the Federal Reserve System and the Federal reserve banks 
under subsection (b) of such section 714 shall be completed within 12 
months of the date of enactment of this Act.
  (b) Report.--
          (1) In general.--A report on the audit required under 
        subsection (a) shall be submitted by the Comptroller General to 
        the Congress before the end of the 90-day period beginning on 
        the date on which such audit is completed and made available to 
        the Speaker of the House, the majority and minority leaders of 
        the House of Representatives, the majority and minority leaders 
        of the Senate, the Chairman and Ranking Member of the committee 
        and each subcommittee of jurisdiction in the House of 
        Representatives and the Senate, and any other Member of 
        Congress who requests it.
          (2) Contents.--The report under paragraph (1) shall include a 
        detailed description of the findings and conclusion of the 
        Comptroller General with respect to the audit that is the 
        subject of the report, together with such recommendations for 
        legislative or administrative action as the Comptroller General 
        may determine to be appropriate.
  (c) Repeal of Certain Limitations.--Subsection (b) of section 714 of 
title 31, United States Code, is amended by striking all after ``in 
writing.''.
  (d) Technical and Conforming Amendment.--Section 714 of title 31, 
United States Code, is amended by striking subsection (f).

SEC. 3. AUDIT OF LOAN FILE REVIEWS REQUIRED BY ENFORCEMENT ACTIONS.

  (a) In General.--The Comptroller General of the United States shall 
conduct an audit of the review of loan files of homeowners in 
foreclosure in 2009 or 2010, required as part of the enforcement 
actions taken by the Board of Governors of the Federal Reserve System 
against supervised financial institutions.
  (b) Content of Audit.--The audit carried out pursuant to subsection 
(a) shall consider, at a minimum--
          (1) the guidance given by the Board of Governors of the 
        Federal Reserve System to independent consultants retained by 
        the supervised financial institutions regarding the procedures 
        to be followed in conducting the file reviews;
          (2) the factors considered by independent consultants when 
        evaluating loan files;
          (3) the results obtained by the independent consultants 
        pursuant to those reviews;
          (4) the determinations made by the independent consultants 
        regarding the nature and extent of financial injury sustained 
        by each homeowner as well as the level and type of remediation 
        offered to each homeowner; and
          (5) the specific measures taken by the independent 
        consultants to verify, confirm, or rebut the assertions and 
        representations made by supervised financial institutions 
        regarding the contents of loan files and the extent of 
        financial injury to homeowners.
  (c) Report.--Not later than the end of the 6-month period beginning 
on the date of the enactment of this Act, the Comptroller General shall 
issue a report to the Congress containing all findings and 
determinations made in carrying out the audit required under subsection 
(a).

  Amend the title so as to read:

      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.

                     Committee Statement and Views


                          PURPOSE AND SUMMARY

    H.R. 459 empowers the Government Accountability Office 
(GAO), the investigative arm of Congress, to conduct a full 
audit of the Federal Reserve.

                  BACKGROUND AND NEED FOR LEGISLATION

    The Federal Reserve System was created by Congress in 1913, 
and Congress has delegated to it the power, enumerated in 
Article I, Section 8 of the Constitution, to regulate the 
supply and value of money. The Federal Reserve struggled in its 
early years to achieve independence from the Executive Branch, 
in particular the Treasury Department, with respect to monetary 
policy. Independence from the Executive Branch is an essential 
safeguard against the manipulation of the money supply for 
short-term political gain. Congress also chose to impose 
certain restrictions on its own access to information about the 
Federal Reserve's actions with respect to monetary policy. 
These restrictions, however, hinder the ability of Congress--
and ultimately the American people--to make informed decisions 
about the Federal Reserve's use of its congressionally 
delegated authority.
    H.R. 459 explicitly lifts these unnecessary restrictions on 
Congressional access to information about the Federal Reserve, 
thereby restoring the ability of the Legislative Branch to 
conduct oversight of the central bank's exercise of its 
constitutionally delegated authority. The intent of this 
legislation is to allow Congress to make informed decisions 
about the Federal Reserve's use of the powers delegated to it 
by lawmakers by increasing the transparency and accountability 
of the Federal Reserve to Congress.
    Increasing the transparency and accountability of the 
Federal Reserve to Congress has become all the more important 
in light of the expansion of the Federal Reserve's balance 
sheet since the financial crisis of 2008-2009. When Wall Street 
investment bank Lehman Brothers collapsed in September 2008, 
marking the start of the crisis, the balance sheet of the 
Federal Reserve stood at $900 billion, a sum accumulated over 
the prior 93 years of the central bank's existence. Yet, as a 
result of the Federal Reserve's unprecedented emergency actions 
in response to the crisis, within seven weeks of the collapse 
of Lehman Brothers, the Federal Reserve's balance sheet had 
doubled to $1.8 trillion, and within another six weeks it had 
reached $2.4 trillion. Even after the crisis abated, the 
Federal Reserve continued to expand its balance sheet, which 
stood at $3 trillion as of June 2012. This expansion occurred 
primarily through unconventional means of influencing the money 
supply, such as quantitative easing and the creation of dollar 
swap lines with the European Central Bank to provide assistance 
to failing European banks. These actions can profoundly affect 
the economic and fiscal health of the United States, and 
Congress should have greater access to information about them.

                          LEGISLATIVE HISTORY

    The Federal Banking Agency Audit Act of 1978 (1978 Act) 
expanded GAO's audit access to the Federal Reserve's role in 
banking regulation and payment systems, while specifically 
prohibiting GAO from auditing activities related to four key 
areas: (1) Transactions for or with a foreign central bank, 
foreign government or international financing agency; (2) 
Deliberations, decisions, or actions on monetary policy 
matters, including discount window operations, reserves of 
member banks, securities credit, interest on deposits, and open 
market operations; (3) Transactions made under the direction of 
the Federal Open Market Committee; and (4) Any discussions or 
communications among or between members of the Federal Reserve 
Board of Governors and officers and employees of the Federal 
Reserve system related to the above. Before 1978, GAO could 
only audit the Federal Reserve in its role as fiscal agent of 
the U.S. Treasury, under GAO's authority to audit the Treasury.
    An amendment to the Helping Families Save Their Homes Act 
of 2009 allowed GAO to audit ``any action taken by the Board 
under . . . Section 13(3) of the Federal Reserve Act with 
respect to a single and specific partnership or corporation.'' 
Section 13(3) refers to the emergency authorities granted to 
the Federal Reserve by Congress for use during ``unusual and 
exigent circumstances.'' It was largely under Section 13(3) 
that the Federal Reserve responded to the financial crisis of 
2008-2009.
    A version of H.R. 459, which garnered 320 cosponsors and 
would have lifted the restrictions on GAO included the 1978 
Act, was included in H.R. 4173, the House-passed version of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act). The Dodd-Frank Act (P.L. 111-203), however, 
only expanded GAO's authority to audit certain process-oriented 
aspects of the Federal Reserve's emergency actions under 
Section 13(3). The Dodd-Frank Act left in place all of the 
long-standing restrictions on GAO's ability to audit the 
Federal Reserve included in the 1978 Act.
    H.R. 459 explicitly lifts the restrictions of the 1978 Act 
enumerated above.

                           Section-by-Section

    This section-by-section pertains to the amendment in the 
nature of a substitute offered by Chairman Issa, which was 
agreed to by voice vote.

Section 1. Short title

    Section 1 establishes the short title of the bill as the 
``Federal Reserve Transparency Act of 2012.''

Section 2. Audit reform and transparency for the Board of Governors of 
        the Federal Reserve System

    Section 2 directs GAO to conduct an audit within 12 months 
of the date of enactment, with a report to be delivered to 
Congress within 90 days of completion of the audit. The audit 
must include a detailed description of the findings of the 
audit with GAO's recommendations for legislative and 
administrative action. Section 2 also removes the restrictions 
placed on GAO's ability to audit the Federal Reserve contained 
in 31 U.S.C. Sec. 714. Finally, Section 2 makes a technical 
correction to 31 U.S.C. Sec. 714 by removing language, included 
in the Dodd-Frank Act, which explicitly provided for GAO's 
audit of the Federal Reserve's use of certain emergency 
authorities, because this language would be rendered redundant 
by passage of the Act.

Section 3. Audit of loan file reviews required by enforcement actions

    Section 3 directs GAO to conduct an audit of the files of 
certain residential mortgage loans in foreclosure in 2009 and 
2010. The Federal Reserve has required regulated financial 
institutions which service these loans to hire independent 
consultants to undertake reviews of these files because they 
were found to have been improperly reviewed prior to putting 
them into foreclosure. Section 3 simply requires GAO to conduct 
an audit of the Federal Reserve's enforcement actions with 
regard to these loan file reviews and to make a report to 
Congress within six months of the date of enactment of this 
Act.

                       Explanation of Amendments

    Mr. Issa offered an amendment in the nature of a substitute 
which changed the due date of the audit required by the bill to 
12 months from the date of enactment in order to allow GAO 
sufficient time to complete its work. The amendment was agreed 
to by voice vote.
    Mr. Cummings offered and then withdrew an amendment to the 
Issa amendment in the nature of a substitute which would have 
restored the restrictions placed on GAO's ability to audit the 
Federal Reserve by the Dodd-Frank Act.
    Mr. Cummings offered an amendment to the Issa amendment in 
the nature of a substitute which requires GAO to conduct an 
audit of loan file reviews of certain residential mortgage 
loans in foreclosure in 2009 and 2010. The amendment was agreed 
to by voice vote.

                        Committee Consideration

    On June 27, 2012, the Committee met in open session and 
ordered reported favorably the bill, H.R. 459, as amended, by 
voice vote, a quorum being present.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to the terms and conditions of 
employment or access to public services and accommodations. 
This bill empowers the Government Accountability Office to 
conduct a full audit of the Federal Reserve. As such this bill 
does not relate to employment or access to public services and 
accommodations.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report.

                     Federal Advisory Committee Act

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., Section 5(b).

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement as to 
whether the provisions of the reported include unfunded 
mandates. In compliance with this requirement the Committee has 
received a letter from the Congressional Budget Office included 
herein.

                         Earmark Identification

    H.R. 459 does not include any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 459. However, clause 3(d)(3)(B) of that rule provides that 
this requirement does not apply when the Committee has included 
in its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause (3)(c)(3) of rule XIII of the Rules 
of the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following cost estimate for H.R. 459 from the Director of 
Congressional Budget Office:

                                                      July 5, 2012.
Hon. Darrell Issa,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 459, the Federal 
Reserve Transparency Act of 2012.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 459--Federal Reserve Transparency Act of 2012

    H.R. 459 would direct the Government Accountability Office 
(GAO) to prepare audits of the Board of Governors of the 
Federal Reserve System and the Federal Reserve banks. The first 
audit would cover all of the activities of the Federal Reserve, 
and the second would review loan files of foreclosed 
homeowners.
    The costs to conduct such audits and reports could vary 
depending on the level of detail included and the 
comprehensiveness of the audits. Based on information from GAO 
regarding the level of effort required for its previous audit 
of the Federal Reserve that was required by the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Public Law 111-203), 
CBO estimates that implementing H.R. 459 would cost $5 million 
over the 2013-2014 period. That cost would cover around 15 
full-time and part-time GAO employees plus administrative 
expenses necessary to prepare the two audits required under the 
bill.
    Enacting H.R. 459 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    H.R. 4155 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was approved by Peter H. Fontaine, 
Assistant Director for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets and 
existing law in which no change is proposed is shown in roman):

                      TITLE 31, UNITED STATES CODE

SUBTITLE I--GENERAL

           *       *       *       *       *       *       *


CHAPTER 7--GOVERNMENT ACCOUNTABILITY OFFICE

           *       *       *       *       *       *       *


SUBCHAPTER II--GENERAL DUTIES AND POWERS

           *       *       *       *       *       *       *


Sec. 714. Audit of Financial Institutions Examination Council, Federal 
                    Reserve Board, Federal reserve banks, Federal 
                    Deposit Insurance Corporation, and Office of 
                    Comptroller of the Currency

  (a) * * *
  (b) Under regulations of the Comptroller General, the 
Comptroller General shall audit an agency, but may carry out an 
onsite examination of an open insured bank or bank holding 
company only if the appropriate agency has consented in 
writing. [Audits of the Board and Federal reserve banks may not 
include--
          [(1) transactions for or with a foreign central bank, 
        government of a foreign country, or nonprivate 
        international financing organization;
          [(2) deliberations, decisions, or actions on monetary 
        policy matters, including discount window operations, 
        reserves of member banks, securities credit, interest 
        on deposits, and open market operations;
          [(3) transactions made under the direction of the 
        Federal Open Market Committee; or
          [(4) a part of a discussion or communication among or 
        between members of the Board and officers and employees 
        of the Federal Reserve System related to clauses (1)-
        (3) of this subsection.]

           *       *       *       *       *       *       *

  [(f) Audits of Credit Facilities of the Federal Reserve 
System.--
          [(1) Definitions.--In this subsection, the following 
        definitions shall apply:
                  [(A) Credit facility.--The term ``credit 
                facility'' means a program or facility, 
                including any special purpose vehicle or other 
                entity established by or on behalf of the Board 
                of Governors of the Federal Reserve System or a 
                Federal reserve bank, authorized by the Board 
                of Governors under section 13(3) of the Federal 
                Reserve Act (12 U.S.C. 343), that is not 
                subject to audit under subsection (e).
                  [(B) Covered transaction.--The term ``covered 
                transaction'' means any open market transaction 
                or discount window advance that meets the 
                definition of ``covered transaction'' in 
                section 11(s) of the Federal Reserve Act.
          [(2) Authority for audits and examinations.--Subject 
        to paragraph (3), and notwithstanding any limitation in 
        subsection (b) on the auditing and oversight of certain 
        functions of the Board of Governors of the Federal 
        Reserve System or any Federal reserve bank, the 
        Comptroller General of the United States may conduct 
        audits, including onsite examinations, of the Board of 
        Governors, a Federal reserve bank, or a credit 
        facility, if the Comptroller General determines that 
        such audits are appropriate, solely for the purposes of 
        assessing, with respect to a credit facility or a 
        covered transaction--
                  [(A) the operational integrity, accounting, 
                financial reporting, and internal controls 
                governing the credit facility or covered 
                transaction;
                  [(B) the effectiveness of the security and 
                collateral policies established for the 
                facility or covered transaction in mitigating 
                risk to the relevant Federal reserve bank and 
                taxpayers;
                  [(C) whether the credit facility or the 
                conduct of a covered transaction 
                inappropriately favors one or more specific 
                participants over other institutions eligible 
                to utilize the facility; and
                  [(D) the policies governing the use, 
                selection, or payment of third-party 
                contractors by or for any credit facility or to 
                conduct any covered transaction.
          [(3) Reports and delayed disclosure.--
                  [(A) Reports required.--A report on each 
                audit conducted under paragraph (2) shall be 
                submitted by the Comptroller General to the 
                Congress before the end of the 90-day period 
                beginning on the date on which such audit is 
                completed.
                  [(B) Contents.--The report under subparagraph 
                (A) shall include a detailed description of the 
                findings and conclusions of the Comptroller 
                General with respect to the matters described 
                in paragraph (2) that were audited and are the 
                subject of the report, together with such 
                recommendations for legislative or 
                administrative action relating to such matters 
                as the Comptroller General may determine to be 
                appropriate.
                  [(C) Delayed release of certain 
                information.--
                          [(i) In general.--The Comptroller 
                        General shall not disclose to any 
                        person or entity, including to 
                        Congress, the names or identifying 
                        details of specific participants in any 
                        credit facility or covered transaction, 
                        the amounts borrowed by or transferred 
                        by or to specific participants in any 
                        credit facility or covered transaction, 
                        or identifying details regarding assets 
                        or collateral held or transferred by, 
                        under, or in connection with any credit 
                        facility or covered transaction, and 
                        any report provided under subparagraph 
                        (A) shall be redacted to ensure that 
                        such names and details are not 
                        disclosed.
                          [(ii) Delayed release.--The 
                        nondisclosure obligation under clause 
                        (i) shall expire with respect to any 
                        participant on the date on which the 
                        Board of Governors, directly or through 
                        a Federal reserve bank, publicly 
                        discloses the identity of the subject 
                        participant or the identifying details 
                        of the subject assets, collateral, or 
                        transaction.
                          [(iii) General release.--The 
                        Comptroller General shall release a 
                        nonredacted version of any report on a 
                        credit facility 1 year after the 
                        effective date of the termination by 
                        the Board of Governors of the 
                        authorization for the credit facility. 
                        For purposes of this clause, a credit 
                        facility shall be deemed to have 
                        terminated 24 months after the date on 
                        which the credit facility ceases to 
                        make extensions of credit and loans, 
                        unless the credit facility is otherwise 
                        terminated by the Board of Governors.
                          [(iv) Exceptions.--The nondisclosure 
                        obligation under clause (i) shall not 
                        apply to the credit facilities Maiden 
                        Lane, Maiden Lane II, and Maiden Lane 
                        III.
                          [(v) Release of covered transaction 
                        information.--The Comptroller General 
                        shall release a nonredacted version of 
                        any report regarding covered 
                        transactions upon the release of the 
                        information regarding such covered 
                        transactions by the Board of Governors 
                        of the Federal Reserve System, as 
                        provided in section 11(s) of the 
                        Federal Reserve Act.]

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    The United States Federal Reserve System is an independent 
central bank, and its monetary policy actions are not subject 
to approval by other entities. This independence is critical to 
the ability of the Board of Governors of the Federal Reserve to 
pursue monetary policies it considers most responsive to the 
nation's current economic conditions and most likely to fulfill 
its dual mandate of promoting maximum employment and stable 
prices.
    The Federal Banking Agency Audit Act of 1978 established 
that the Federal Reserve system may be audited by the 
Government Accountability Office (GAO), and regular audits have 
been conducted since that date. However, that Act included 
protections now codified in 31 U.S.C. 714(b) to ensure that the 
Federal Reserve's monetary policymaking remains independent 
from outside political influence.
    In 2010, the Dodd-Frank Wall Street Reform and Consumer 
Protection Act expanded the types of audits GAO may conduct of 
the Federal Reserve, as well as the data that regularly must be 
disclosed to the public by the Federal Reserve.
    For example, the Dodd-Frank Act required GAO to audit the 
emergency financial assistance provided by the Federal Reserve 
during the financial crisis. The Act also added a new 
subsection (f) to 31 U.S.C. 714 which opens the transactions 
and discount window operations authorized under section 11(s) 
of the Federal Reserve Act to audit so GAO can assess their 
operational integrity and internal controls, the effectiveness 
of security and collateral policies, the fairness to all 
institutions of such transactions, and the policies governing 
the use of third-party contractors engaged to manage such 
transactions.
    The Dodd-Frank Act required the Federal Reserve to post on 
its website all GAO reports, annual financial statements, 
reports to Congress, and any other information ``necessary or 
helpful to the public in understanding the accounting, 
financial reporting and internal controls of the Board and 
Federal Reserve banks.'' In addition, the Dodd-Frank Act 
required the Federal Reserve to release information regarding 
borrowers and counterparties participating in emergency credit 
facilities, discount lending programs, and open market 
operations, including the names of the parties, the amount 
borrowed by or transferred to the participant or counterparty, 
the interest rate or discount and the collateral pledged. The 
information must be released within one year of the termination 
of a credit facility, and within two years of a discount 
lending transaction or open market operation.
    The Dodd-Frank Act was carefully crafted to expand 
transparency surrounding the Federal Reserve's operations 
without impeding its ability to carry out the critical 
responsibility of independently setting our nation's monetary 
policy.
    In contrast, H.R. 459 would significantly alter this 
balance by permanently repealing the provisions in 31 U.S.C. 
714(b). GAO would be permitted to audit the Federal Reserve's 
transactions with foreign central banks and transactions 
conducted under the direction of the Federal Open Market 
Committee. GAO also would be able to audit the Federal 
Reserve's internal deliberations on monetary policy matters, as 
well as discussions or communications Members of the Board have 
with each other and with staff of the Federal Reserve System 
regarding monetary policy.
    There is significant concern that opening the Federal 
Reserve's monetary policy deliberations to GAO audit in this 
way--including audits conducted without any significant elapse 
of time from the point of decision--could influence how such 
deliberations are conducted and potentially even the policies 
that are chosen, thus degrading the independence of the Federal 
Reserve.
    If all restrictions on GAO's ability to audit the Federal 
Reserve's deliberative processes are removed, Members of 
Congress could actively seek to influence the Federal Reserve's 
deliberations by the types and subjects of audits they request 
of GAO. Members of Congress could also seek to obtain the 
materials GAO assesses when performing its audits, including 
documents related to the Federal Reserve's deliberations.
    The Oversight Committee has held no hearings on this 
legislation and has heard from no witnesses regarding its 
potential consequences. Moving forward on this bill without 
even calling a single witness from the Federal Reserve is a 
misguided approach that is likely to result in many unforeseen 
and potentially damaging consequences.

                                                Elijah E. Cummings.