It was announced yesterday afternoon that the US Senate approved (96-0) a one-time audit of the Federal Reserve System. Specifically the audit will investigate the Federal Reserve’s economic crisis response programs. We suspect that this will also likely include a review of cash reserves and inventory distributions. For those US financial institutions that were hoping to evict the goverment from their board rooms by paying back their TARP loans early, the Senate had another surprise. They also voted to publish the full list of FI’s that received assistance during the crisis.
Is this another indicator that they glory years of privately run banking are truly over? It would seem that if the government is not a shareholder in your bank any longer, they will still require complete transparency, either by regulation or law. Is this a good thing? We ask that question particularly in light of the recent bailouts taking place in the European Union.
Lastly, what might this mean for the suggested imminent demise of “cash as king”? We postulate that these predictions are premature as recent metrics indictae that cash use is one the rise in the US and credit use is declining. So much for the dramatic growth predictions of non-cash based payment systems – at least in the short-term.
by Ronald D. Orol
WASHINGTON (MarketWatch) — A controversial measure requiring the government to conduct an unprecedented one-time audit of the Federal Reserve’s economic crisis response programs was approved with overwhelming bipartisan support Tuesday by the Senate as part of sweeping bank reform legislation. The amendment also calls for releasing the names of institutions that received in total more than $2 trillion in loans from the central bank during the peak of the financial crisis. The provision received a vote of 96-0, with many lawmakers agreeing to back it following a compromise reached late Thursday. “This makes it clear that the Fed can no longer operate under the kind of secrecy it has been operating under,” said Sen. Bernie Sanders, I-Vt., the measure’s author.