People have been excited about the passage of the Fed audit amendment; Ryan Grim calls it "an indication of surging populist sentiment and a financial industry on the defensive."
Maybe. I've been pretty blase about it. As I wrote the other day, the sanitized compromise bill only deals with emergency lending efforts during the crisis. The Fed has already allowed four of these to come under scrutiny and wasn't opposing provisions already in the bill to make future emergency lending facilities more transparent. Ultimately, we already know a lot about how these facilities worked and why. Nonetheless, revealing the details of the loans is certainly a good idea -- so commonsensical, in fact, that the entire Washington political establishment came out to support it, with the Senate voting 96-4 in favor.
This proposal, despite its origins, isn't radical, except in the very banal sense that straightforward ideas can be revolutionary in this town. That's why libertarian Rep. Ron Paul, one of the bill's architects and a proponent of a full Fed audit, called the agreement "disappointing" in this strangely-headlined article. It would be one thing if the amendment interfered in monetary policy at all, but a proposal by Sen. David Vitter to restore the whole of Paul's bill failed, 37-62. That's almost the same margin of failure as the Brown-Kaufman bill to break up the banks, which went down 33-61. That's the state of radicalism in the U.S. Senate. (Mea culpa: I thought K-B would attract much more support than it did).
I'd also recommend you this post by Sarah Binder, who observes both the anoydne audit and the fact that the archaic regional Fed superivsion system remains intact and concludes that "Congress seems to have little appetite for tampering with the Fed." You can read this to get a sense of what ought to be done to our central bank.
-- Tim Fernholz