A Glimpse at the Senator Who Fought the Fed

By:  Maya Jackson Randall
The Wall Street Journal

WASHINGTON—Bernie Sanders, a white-haired Vermont Independent and the Senate's lone socialist, led a fight against the Federal Reserve and won, forcing the central bank to disclose more details than ever on its rescue actions during the financial crisis.

The Fed is poised to post online at noon today the names of financial firms that took more than $2 trillion in loans from the Fed during the height of the financial-market turmoil.

Also, the Government Accountability Office will conduct an audit of the Fed's emergency actions, going back to the start of the crisis in 2007.

Sen. Sanders was a vocal and persistent leader in the mission to audit the Fed. The Senate in May voted 96-0 in favor of his compromise plan to force the Fed to reveal a new level of data on its emergency lending programs. The plan was included in the sweeping financial regulatory overhaul Congress passed earlier this year.

"This $2 trillion … does not belong to the Fed. It belongs to the American people, and the American people have a right to know where trillions of dollars of their taxpayer dollars are going," Sen. Sanders said in a May speech on the Senate floor. "Who got what? When did they get it? On what basis, on what terms? Who was at the meetings? Who made the decisions, and were there conflicts of interest—simple factual questions that the American people deserve answers to."

The Fed has kept key deliberations closely guarded. It has taken steps to boost transparency, but has kept certain details secret, such as the names of banks that used its discount window, where eligible institutions can borrow money to plug liquidity shortages.

Also, Federal Reserve Chairman Ben Bernanke strongly objected to efforts to subject monetary policy decisions to audits, saying it would "seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation."

Still, with the help of Reps. Alan Grayson (D., Fla.) and Ron Paul (R., Texas), Sen. Sanders's audit-the-Fed mission attracted widespread support as conservative and progressive lawmakers alike agreed that the Fed has operated in secrecy without sufficient oversight for far too long.

Anger was growing over the Treasury Department's $700 billion financial bailout program and the Fed's costly rescue programs, with critics arguing that Wall Street was getting secret bailouts while Main Street continued to struggle with foreclosures and unemployment.

Under pressure from the Obama administration, Sen. Sanders made last-minute changes to his proposal. It doesn't require audits of monetary policy, and it doesn't require disclosure of the names of banks that use the discount window.

An unhappy Rep. Paul, a longtime Fed critic, said Sen. Sanders had "sold out."

But this is probably not the end of Sen. Sanders's battle. He plans to use today's data deluge to investigate potential conflicts of interest and to examine whether firms tapped into secret loans from the Fed as a way to escape TARP restrictions.

Also, Sen. Sanders plans to closely examine data on swap arrangements with foreign central banks, which could raise more questions going forward.