$Trillion Bailout of Euro, Greece Shows Need to Audit the Fed

Tuesday, May 11, 2010
By Paul Martin

by William F. Jasper

The timing of the sellout by Senator Bernie Sanders (I-Vt.) last Thursday, May 6, on legislation to audit the Federal Reserve could not have been more auspicious — or more suspicious. After pledging for months that he was going to offer an amendment in the Senate identical to “Audit the Fed” legislation in the House (H.R. 1207) authored by Congressman Ron Paul (R-Texas), Sanders caved in to pressures from the Obama administration and the Federal Reserve.

In a last-minute switch, Sanders agreed to substitute a watered-down version of the audit as an amendment to financial reform legislation sponsored by Senate Banking Committee Chairman Christopher Dodd (D-Conn.). The new Sanders amendment would provide the administration, the Fed, and Members of Congress with a certain level of cover, allowing them to claim that they had supported auditing the Fed, while at the same time allowing the Fed to continue most of its operations in secret, beyond the scrutiny of Congress and the public. The effort to push the Sanders amendment through on a rush vote on May 6 failed thanks to the efforts of Senator David Vitter (R-La.), a fierce Fed critic, who insisted on a side-by-side vote of the Sanders sellout amendment with the original audit amendment. Those votes could come as early as Tuesday, May 11.

The Sanders flip-flop came less than 72 hours prior to the Federal Reserve announcing that it was opening a credit line to European central banks and the International Monetary Fund (IMF) to bailout bankrupt Greece and the crumbling euro. The massive bailout, which the Associated Press described as “a bold $1 trillion rescue by the European Union,” buoyed world markets, but is sure to be a very temporary fix. The IMF will contribute $325 billion to the pot.

Where does the IMF get its money? Well, some 20 percent of it comes from the U.S. taxpayers, in the form of what is called the “quota” or “subscription” by the United States. That means that roughly $65 billion of the IMF’s new “loan” to the EU will be underwritten by the U.S. taxpayers, who are already on the hook for trillions of dollars to cover bailouts and past spending by our own government. Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke definitely do not want the details of this latest bailout to be exposed by an audit, which would only drastically swell the ranks of the growing Tea Party movement and stoke the fires of the “throw the bums out” attitude that is already causing havoc for incumbents.

More havoc is on the way, as the ongoing riots and unrest in Greece portend. Addressing the issue, Rep. Paul appeared on FOX News with Megyn Kelly over the weekend to explain that the Greece/Euro crisis was evidence that we have moved from a serious financial crisis to a much more serious currency crisis, one that is going global and will shake the dollar as well. As Megyn Kelly and Ron Paul both pointed out, the Fed is getting away with carrying out these enormous transfers of assets in secrecy because there is no audit process in place to monitor and challenge them.

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