Audit the Fed? not so fast

NOT this again. Calls to "Audit the Fed" are back. And just as before, they are extraordinarily dangerous to the health of the U.S. economy. First, a little background. Conspiracy theories about the Federal Reserve's wacky technical mumbojumbo voodoo have a long populist history. Monetary policy is complicated and abstract; entrusting it to a secretive, propeller-headed cabal naturally arouses suspicion. No surprise, then, that libertarian hero and former Texas congressman Ron Paul for years tried to persuade his colleagues to curb the central bank's power and independence with recurrent calls to "Audit the Fed" (if not kill it entirely). He made Fed audits a centerpiece of his 2008 and 2012 presidential campaigns.

Now, with Republicans controlling both houses of Congress, he might finally get his way. Sen. Rand Paul (R-Ky.) has picked up his father's mantle and reintroduced the proposal as the Federal Reserve Transparency Act of 2015. Sen. Ted Cruz (R-Tex.) - like Paul a likely 2016 presidential contender - has also joined the cause, along with 29 other co-sponsors. A companion bill was introduced in the House by Rep. Thomas Massie (R-Ky.).

"A complete and thorough audit of the Fed will finally allow the American people to know exactly how their money is being spent by Washington," Paul the Younger said in a statement. The Fed "currently operates under a cloak of secrecy and it has gone on for too long." That alleged "cloak of secrecy" is looking a little threadbare, if you ask me.

The Federal Reserve Board and its 12 affiliated regional Fed banks already undergo an audit. Multiple layers of audits, in fact, by the Government Accountability Office, the Office of the Inspector General and independent private auditors such as Deloitte. The Fed also releases weekly data about its balance sheet and the minutes from its closely watched Federal Open Market Committee meetings with a three-week delay.

Under chairman Alan Greenspan, the Fed was often criticized (and parodied) for its Delphic pronouncements and opacity, but his successors, Ben Bernanke and now Janet Yellen, have cultivated transparency and engagement with the public. The Fed chair holds televised news conferences now. Fed officials regularly give speeches and interviews discussing how their views of the economy and policy preferences differ from those of their colleagues. Twenty years ago this sort of public dissent was unheard of; today it is commonplace, and largely Yellen's doing. Not because of congressional compulsion, mind you: Yellen has instead said, multiple times, that she believes more open communication about Fed activity and intentions is good for the economy and helps monetary policy work more effectively. Why, then, would Yellen oppose the Paul legislation? And why likewise are so many financial journalists - who are genetically predisposed to value transparency above all else - skeptical of it? The problem is, despite the name, this bill is not really about transparency.