Time to Audit the Fed: Pulling Back the Curtain on America’s Most Powerful Financial Institution
1. Partisan Ratio Among Fed Economists
Details/Statistics: 208 Democrats vs. 20 Republicans (≈10.4:1 overall; even higher in leadership)
2. Board of Governors Breakdown
Details/Statistics: 97 Democrats vs. 2 Republicans (≈48.5:1)
3. Fed Balance Sheet Peak
Details/Statistics: Approximately $8 trillion at its peak (some sources report nearly $9 trillion during the pandemic)
4. Fed Policy in the Great Depression
Details/Statistics: Policies were marked by adherence to the gold standard and tight credit, which many critics argue deepened deflation and unemployment
5. Historical Inflation Data (1970s)
Details/Statistics: Inflation reached double-digit levels (often above 10%, with peaks near 13–14% in certain periods)
6. Housing Crisis Data (2008–2009)
Details/Statistics: Millions of foreclosures; trillions of dollars in lost household wealth
7. Pandemic Response
Details/Statistics: Rapid rate cuts, unprecedented asset purchases (QE), and emergency lending facilities; balance sheet expansion by several trillion dollars
8. Quantitative Easing (QE) & Quantitative Tightening (QT)
Details/Statistics: QE involved large-scale asset purchases (adding trillions to the balance sheet); QT refers to a gradual runoff (allowing maturing Treasuries and MBS to roll off without reinvestment)
9. Interest Rate Policy Controversies
Details/Statistics: Examples include the pace of rate cuts post-pandemic and internal dissent (e.g., Michelle Bowman’s vote against a 50‑basis‑point cut)
10. Fed Governance & Political Pressure
Details/Statistics: Episodes such as controversial nomination battles (e.g., Judy Shelton) and pressures from political figures (e.g., Trump’s calls for influence)
From debates over USAID funding to questions about military aid and intelligence agency oversight, news headlines in Washington are often dominated by stories that stir immediate political passions. Yet amid these high-profile issues—where billions of taxpayer dollars are visibly appropriated—the Federal Reserve continues to wield trillions of dollars in influence on financial markets with far less public scrutiny. Instead of staying mired in cyclical news stories, it’s time for Congress and the American people to confront a more fundamental question: Shouldn’t we be able to audit the Fed as comprehensively as we audit USAID, the Pentagon, or intelligence agencies?
For decades, attempts to “Audit the Fed” have stalled in Congress, hindered by political roadblocks and statutory protections. The Fed’s immense power over monetary policy—a realm typically shielded from deeper audits—has quietly grown alongside its balance sheet, which in recent years surpassed 8 trillion dollars. Meanwhile, studies reveal a significant political imbalance among Fed personnel, raising concerns about potential groupthink and partisan bias.
Why Audit the Federal Reserve?
Transparency and Trust
When government agencies like USAID and the Department of Defense spend taxpayer money, they face rigorous oversight and frequent public debate. The Federal Reserve, however, operates under partial exemptions from such scrutiny, especially regarding monetary policy decisions, FOMC operations, and foreign transactions.
True accountability requires letting the sunlight in. While some Fed activities are audited by the Government Accountability Office (GAO), the most consequential decisions—and their impacts on inflation, employment, and interest rates—remain largely behind closed doors.
The Biggest Balance Sheet
With a balance sheet soaring over 8 trillion dollars, the Fed’s market interventions dwarf the budgets of many federal agencies combined. A comprehensive audit would ensure that actions taken by the Fed are aligned with the public interest, not just that of financial elites.
Congressional authority over the public purse typically extends to all corners of government spending. Making an exception for the Fed’s core activities—arguably among the nation’s most impactful—challenges basic democratic principles.
In a world where USAID, military aid, and intelligence spending make headlines daily—and justifiably face scrutiny—America’s central bank has quietly become one of the most influential economic forces on the planet. If transparency is required elsewhere, why not demand the same from the Federal Reserve?
By enacting comprehensive audits, refining governance structures, and ensuring balanced representation, Congress can restore public trust and safeguard the Fed’s role as a pillar of U.S. financial stability. It’s time to stop allowing other government debates to distract us—and finally focus on where a significant portion of our collective economic power truly resides.