Legislation to subject the Federal Reserve's monetary policy to audits sailed through the U.S. House of Representatives on Wednesday although the measure is expected to die in the Democrat-controlled Senate.
The legislation, written by Republican representative Ron Paul, whose anti-Fed crusade prompted a presidential bid and his grass-roots folk-hero status, passed the House by a 327-98 vote on Wednesday, exceeding the two-thirds majority needed.
Fed officials have long fought the audit bill, arguing it would compromise their independence. Chairman Ben Bernanke told House lawmakers last week it would open the door to a "nightmare scenario" of political meddling in monetary policy decisions.
The vote showed bipartisan support in the House for greater scrutiny of the U.S. central bank's powers which, were expanded to help it tackle the financial crisis.
"I don't know how anybody could be against transparency," Paul said during a debate on the floor on Tuesday, adding that Americans deserved more details of the Fed's bank rescue deals and support to foreign central banks.
"They're sick and tired of what happened in the bailout and where the wealthy got bailed out and the poor lost their jobs and they lost their homes," said Paul, who retires at year-end.
"It's time that we stood up to the Federal Reserve that right now acts like some kind of high, exalted priesthood, unaccountable to democracy," added Dennis Kucinich, a Democrat who is losing his seat due to a primary defeat.
Many Republicans and some Democrats have criticized the Fed's extraordinary measures to rescue banks and buy mortgage and Treasury debt, saying the central bank strayed into Congress' fiscal policy territory.
They say the Fed's actions to ease the 2007-2009 recession may have planted the seeds of high inflation in the future.
The Fed asset purchases, aimed at lowering borrowing costs and spurring economic growth, have swollen its balance sheet to $2.8 trillion from around $800 billion before the crisis. It has held interest rates at nearly zero for three and a half years and has pledged to keep them extraordinary low until late 2014.
Paul's bill directs the Government Accountability Office, an independent, nonpartisan congressional agency, to conduct a full Fed review. It would remove an exemption that shielded from audit the monetary policy and other decisions by the Federal Open Market Committee.
NO VOTE IN SENATE Paul's son, Republican Senator Rand Paul, has introduced a companion bill, but the Democrats who control the Senate do not intend to bring it to a vote, a senior Democratic aide said.
But the aide said Rand Paul was expected to try to force a vote on it as an amendment to other legislation.
Some Democrats, generally less critical of the Fed, say such audits would undermine the Fed's independence and erode market confidence in the central bank.
SECOND CHANCE IN 2013? Should Republicans win control of the Senate in November's elections, the Paul audit measure will likely resurface in some form next year. Rand Paul will continue in the Senate and will succeed his father as Congress' top Fed critic.
His efforts to rein in the Fed's powers also could shift next year to a campaign to replace Bernanke, whose four-year term expires Jan. 31, 2014.
Ron Paul also may try to influence future Republican policy toward the Fed by insisting that portions of the bill be incorporated into the Republican economic platform at the party's convention in Tampa in August.
"Paul has 158 delegates and it is not inconceivable that some 'audit the Fed' language is prevalent in the Republican platform when all is said and done," said Chris Krueger, senior policy analyst at Guggenheim Partners in Washington.