Bernie Sanders, the Senate's Lone Socialist, Wins Backing in Effort to Curb Fed

Sen. Bernie Sanders can seem like a character from another era with his rumpled suits and oratory about economic justice. But as anger at bankers and Wall Street runs high, Congress's only self-declared socialist is moving to center stage.

An amendment sponsored by the independent senator from Vermont to require Federal Reserve audits is gaining momentum, powered by a coalition of activists on the left and right who are taking aim at the financial establishment for its role in the economic collapse.

Mr. Sanders's amendment, which is likely to be voted on within days, is worrying White House officials, who say it would violate the central bank's independence and cripple its ability to protect the economy. 

The measure would probably need 60 votes to pass—similar legislation received 59 votes last year—and if it seems headed for victory the administration would likely mount a major counteroffensive.

The amendment has drawn an unusually broad alliance of backers. Mr. Sanders's 19 co-sponsors include liberals such as Sen. Patrick Leahy (D., Vt.) and conservatives like Sen. Jim DeMint (R., S.C.). The measure is supported with equal fervor by the AFL-CIO labor union and the conservative lobby group Americans for Tax Reform.

The amendment would remove restrictions on Congress's ability to audit the central bank. Congress currently cannot review the Fed's monetary-policy decisions, direct loans to commercial banks or transactions involving foreign central banks or governments. The provision would also require the central bank to disclose the low-interest loans and other financial assistance it gave financial companies during the recession.

Mr. Sanders argues the Fed shouldn't be allowed to keep its deliberations private.

"Nobody in America, or very few people, think that makes any sense at all," he said. "Putting trillions of dollars at risk, and you don't know who got it, who made the decisions, the possible conflicts of interests, what they did with it?"

The legislation would prohibit reviews of unreleased transcripts or minutes of Fed policy meetings for six months, and the amendment says it should not be "construed as interference in or dictation of monetary policy."

Critics say auditors would be able to interview Fed policy makers and staffers about monetary-policy decisions, a scenario they say that would weaken investors' confidence that decisions are free from political influence. That perception of independence is a critical ingredient for any functioning central bank.

"One of the great strengths of our financial structure is that we keep monetary policy separate from the political winds of the day," Sen. Judd Gregg (R., N.H.) said in an interview. "That was the whole idea in setting up the Fed." Mr. Gregg added that he is not confident of defeating the measure.

Senate leaders believe they can beat back Mr. Sanders's amendment. But they concede it is hard to predict the outcome of a Senate vote when passions are running high. Mr. Sanders also supports amendments to the broader financial-overhaul legislation that would break up big banks and cap credit-card interest rates at 15%.

"He takes an issue and just doesn't let go of it," said Sen. Sherrod Brown (D., Ohio).

Mr. Sanders grew up in Brooklyn before moving to Vermont. He was elected mayor of Burlington by just 10 votes, won a House seat in 1990 and a Senate race in 2006.

He usually votes with Democrats, urging them to take what he calls progressive positions. But he is finding a growing number of conservative backers, a sign of how the financial crisis has scrambled alliances. Conservatives joined liberals in attacking the $700 billion bank bailout, for example. And Mr. Sanders teamed with conservatives to fight the reappointment of Fed Chairman Ben Bernanke.

One of Mr. Sanders's partners in his assault on the Fed is Rep. Ron Paul (R., Texas), who led a successful charge in the House to adopt a similar provision last year.

"Yes, we have disagreements, but we both despise fascism," Mr. Paul said, half-jokingly. When governments are primarily used to serve the interests of big corporations, "that's unfair and we don't like it," he said.

—Sudeep Reddy and Damian Paletta contributed to this article.