The top headline on the CNBC home page announces that the Federal Reserve would be forced to close were it fully audited as called for in Congressman Ron Paul’s H.R. 1207, “Federal Reserve Transparency Act,” which currently has over 200 cosponsors in the House. CNBC spoke with Jim Grant, who edits Grant’s Interest Rate Observer:
With $45 billion in capital and $2.1 trillion in assets, the central bank would not withstand the scrutiny normally afforded other institutions, Grant said in a live interview.
“If the Fed examiners were set upon the Fed’s own documents—unlabeled documents—to pass judgment on the Fed’s capacity to survive the difficulties it faces in credit, it would shut this institution down,” he said. “The Fed is undercapitalized in a way that Citicorp is undercapitalized.”
Grant said he would support legislation currently making its way through Congress calling for an audit of the Fed.
Grant goes on to accuse the Federal Reserve of implementing policies which result in moral hazard, and criticizes the Fed’s continued reduction of interest rates to zero.
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