The effort to increase the transparency of the Federal Reserve's operations has picked up surprising momentum over the last month, and has now surged past the 218 votes needed for passage in the House of Representatives.
The bill boasts 222 cosponsors, with more and more rank-and-file members of Congress steadily signing on to a bill introduced in February by Rep. Ron Paul (R-Texas) to expand the authority of the Government Accountability Office to audit the Fed.
On Tuesday, Rep. John Boehner of Ohio, the Republican Leader, signed on. On Thursday, Sen. Jim DeMint of South Carolina, one of the chamber's most conservative members, joined Sen. Bernie Sanders of Vermont, perhaps the Senate's most liberal member, in cosponsoring a companion bill.
More than 50 Democrats have joined more than 150 Republicans so far to back HR 1207. A similar bill sponsored by Rep. Dennis Kucinich (D-Ohio) also has momentum and is on pace for a congressional hearing soon in the House Oversight and Government Reform Committee, where Kucinich is a subcommittee chairman. Kucinich this week signed on to Paul's bill, as well.
Having the votes for passage, however, doesn't guarantee passage. Democratic leadership controls the floor schedule. To get around the leaders, backers of the bill would need to file a "discharge petition" with 218 signatures. Backers could also introduce a rule related to the bill, then file a discharge petition to force a vote on the rule. After a mandatory waiting period (30 days on the bill; 7 for the rule), the motion would be discharged from committee and referred to the floor, where it would get a vote on the second or fourth Monday.
But getting those 218 signatures on the petition isn't as easy as getting cosponsors. Cosponsoring a bill is merely to express support; signing a discharge petition can be seen as an act of defiance against leadership.
The bill would authorize the GAO to audit the Fed's funding facilities, such as the Primary Dealer Credit Facility, Term Securities Lending Facility, and Term Asset-Backed Securities Lending Facility -- known as TALF.
The Fed has expanded its liabilities and its balance sheet massively since September 2008, buying toxic assets and lending hundreds of billions to foreign central banks in unchecked swaps, then sending that foreign currency to U.S. banks.
On CNBC Wednesday morning, in response to a question about the bill from guest host Arianna Huffington, Grant's Interest Rate Observer editor Jim Grant endorsed a comprehensive audit of the Fed, saying that if the Fed were subject to the treatment and auditing it gives other banks, it would be found insolvent.
The House Financial Services Committee, said Chairman Barney Frank, plans to take a look at Paul's bill, HR 1207. "I think we should be moving in that direction," Frank said.
Frank wants increased oversight of the Fed but also wants other nations to be assured that the Fed is independent in how it establishes monetary policy.
"We're worried now that it might get people elsewhere worried that the Fed's losing autonomy on monetary policy. With regard to the TALF and stuff that obviously should all be out there, but this could cover the monetary policy setting," Frank said. Because the Chinese are already worried about the security of their investments in U.S. dollars, he said, "I am going to ask that we get to take a look at it from that standpoint, again, making sure that there is no perception that this will impinge on the monetary side of things."
But Frank is willing to move forward. "Yes, the GAO should be able to audit," he said, however, "it would not be able to play into fears that we are losing independence in monetary policy. I don't think that we are, but maybe we need to put some safeguards into deal with that."
Some of the critics of the Fed challenge the very notion that monetary policy should remain independent from Congress. "Monetary policy isn't independent. It just has independence from democracy," said one congressional aide whose boss is signed on to Paul's bill, meaning that the Fed is not independent from political forces, just from Congress.
Such critics have challenged the power the Fed holds known as "section 13(3) authority," referred to as the most powerful paragraph in US law. That section, which grants the Fed nearly unlimited authority in "emergency" situations, could be reviewed as part of the "regulatory restructuring" that Congress and the administration are undertaking.
Defenders of an independent monetary policy, which includes the political elite, argue that politicizing monetary policy would destabilize the financial system, devalue the dollar and lead to higher interest rates.
"If monetary policy is seen as not being independent that could shake people's confidence in the dollar. I mean, we are dealing with a world of nervous people," said Frank.
"To the extent that there's a political element in the monetary policy it would be seen as being very inflationary, and whether that's right or wrong, it would have a negative effect on the dollar, more than we would like on interest rates, on everything else."
A politicized monetary policy is assumed to be inflationary because politicians have an incentive to run-up deficits and then inflate away the debt - a policy that would harm debt holders such as China.
Paul spokesman Jesse Benton rejected the idea that the Fed is or should be independent, arguing it "wields tremendous power and should have full transparency and accountability to the American people. In response to the concerns about the Fed's 'independence, why would a body independent of politics' hire a lobbyist?"
The twin leaders of the movement personify the right-left coalition pressing for Fed reform. Kucinich ran for president representing the Democratic left flank, while Paul ran representing the libertarian wing of his party. The GOP embrace of Paul's Fed skepticism is a signal of its movement in his direction.
At Paul rallies, his criticism of the Fed always roused the crowd to its loudest ovation.
Speaking at a counter-convention rally scheduled to compete with the Republican convention in Minneapolis, all Paul had to do to start chants of "End the Fed!" was note that the nation's prosperity was a mirage.
"I haven't even gotten to that part yet," he told the crowd.
Ryan Grim is the author of This Is Your Country On Drugs: The Secret History of Getting High in America, due out later this month