Sen. Bernie Sanders, I-Vt., won a major victory Tuesday in his yearlong campaign to end the secrecy around more than $1 trillion of emergency loans the Federal Reserve Board made to financial institutions during the 2008 crisis on Wall Street.

The Senate voted unanimously, 96-0, to authorize an audit of the Fed’s loan activities and to require the board to make public who received the loans and under what terms.

“This is an historic breakthrough in lifting the veil of secrecy at the Fed, an enormously powerful institution that plays with trillions of taxpayer dollars, and that has no public visibility or accountability,” Sanders said in a telephone interview after the vote.

His amendment was added to a comprehensive financial regulation bill expected to pass this month.

The Senate proposal would require a one-time audit by Congress’ investigative arm, the Government Accountability Office, and cover a period beginning in December 2007.

The Fed’s short-term lending, designed to increase the liquidity of banks
reeling from the crisis, grew dramatically at the height of Wall Street meltdown. At its peak at the end of 2008, the Fed’s lending totaled $1.16 trillion. Overall, the Fed’s balance sheet ballooned to $2.3 trillion, more than double where it stood before the crisis struck.

Sanders first proposed a broader audit of the Fed, but ran into strong opposition from the Obama administration and Fed Chairman Ben Bernanke. Sanders agreed last week to narrow the scope of his amendment to make clear that Congress will not use audits to second-guess the board’s decisions about monetary policy. The administration then dropped its opposition.

“Nobody in Congress really believes that we should be involved in monetary policy — there shouldn’t be political pressure on whether interest rates go up or down,” Sanders said.

After approving the Sanders’ proposal in its new form, the Senate rejected the broader, original amendment, 62-37.
Cozy with Wall Street

Sanders proposed the amendment last year, after a Budget Committee hearing at which he asked Bernanke for a list of institutions that had received loans. Bernanke refused to identify the companies.

The amendment authorizes an audit only of past actions, not future decisions.

“I had to make a political decision of how to get the votes to pass it,” Sanders said. He said he hopes a House-Senate conference committee will merge the strongest parts of his amendment with the toughest parts of the House-passed version, but “even if it doesn’t happen in this bill, people are going to demand much more transparency and accountability in the future.”

The amendment specifically directs the GAO to look at possible conflicts of interest at the Fed. Sanders has complained of the too-close relationship between Wall Street moguls and the federal bank. Among others, he has singled out Stephen Friedman, who sat on the board of Goldman Sachs while serving as chairman of the Federal Reserve Bank of New York.

“You think dairy farmers in Vermont can sit down with (the Fed) and say ‘Give me a zero-interest loan?’” Sanders asked rhetorically.
Fed gets the message?

In a sign of the Fed’s sensitivity to congressional scrutiny, Bernanke on Tuesday promised to provide weekly reports on so-called swap arrangements set up between the Fed and other central banks to help stem the European debt crisis.

“You already have an influence on the conduct of the Fed in terms of the transparency issues,” said Senate Banking Committee Chairman Christopher Dodd, D-Conn.

The Fed has become a target of public anger in the aftermath of the financial crisis. The idea of auditing the Fed has had populist support from across the political spectrum, from tea party activists to liberals and labor organizations.

“We brought together some of the most conservative members of Congress and some of the most progressive,” Sanders said.

The Associated Press contributed to this report.