–Senate Approves Sanders Amendment For One-Year Fed Audit By GAO
–Senate Rejects Effort For Wide-Ranging Audit of Fed
–Sen. Shelby: GOP Pushing Amends on Derivs, GSEs, Consumer Bureau
–Sen. Shelby: Supports Amendment To Phase Out Fannie, Freddie

By John Shaw

WASHINGTON (MNI) – The Senate Tuesday approved an amendment that
would charge the Government Accountability Office with conducting a
comprehensive, one-time audit of the Federal Reserve Board.

The amendment, which was approved 98 to 0, was sponsored by
Independent senator Bernie Sanders and requires the GAO to conduct an
audit of all of the Fed’s emergency lending activities since December,
2007.

Sanders said the audit is needed to better understand the Fed’s
“hugely expanded role” since 2007 and to examine possible conflicts of
interest.

Sanders’ amendment would require the Fed to put on its Web site all
of the recipients of emergency assistance since December of 2007. The
Fed would have to disclose how much money went to borrowers, the dates
the assistance was offered, the terms of repayment and the “specific
rationale” for the creation of the lending programs.

The amendment explicitly bans the GAO from reviewing the Fed’s
monetary policy, as well as its transactions with other central banks.

The Senate rejected a much more expansive, ongoing audit of the Fed
that was offered by Republican senator David Vitter. It was defeated 37
to 62.

The underlying Senate regulatory reform bill, largely drafted by
Dodd, establishes a new independent Consumer Protection Bureau at the
Federal Reserve Board, creates a process to liquidate failed financial
firms, sets up a council of regulators to oversee systemic risk in the
economy, establishes a regulatory structure for over-the-counter
derivatives, requires hedge funds that manage over $100 million to
register with the SEC and creates a new office within Treasury to
monitor the insurance industry.

Dodd’s bill has been merged with a package that was developed by
the Senate Agriculture Committee which requires OTC markets to adopt
aspects of the regulated markets such as mandatory clearing through
derivatives clearing organizations and trading on exchanges or
exchange-like facilities.

It has a narrow exemption for commercial “end users” who use
derivatives to hedge against economic contingencies such as fluctuations
in fuel prices, currency and interest rates.

At a briefing Tuesday afternoon, Sen. Richard Shelby said he is in
talks with Dodd on making revisions to the derivatives language in the
bill, declaring the current language is not acceptable for him.

Shelby said he is also looking at offering amendments to limit the
reach of the proposed Consumer Protection Bureau.

Shelby also said he supports an amendment by Sen. John McCain to
abolish Fannie Mae and Freddie Mac in two years.

Shelby said that Fannie and Freddie were “at the heart” of the
financial crisis and continue to draw huge subsidies to maintain their
operations.

“There is no end in site. The administration doesn’t want to face
this,” he said.

Shelby disputed Dodd’s assertion that it would be “reckless” to
pull the plug on Fannie and Freddie without some kind of alternative
housing finance structure in place.

“It’s not reckless to pass the amendment. It’s reckless not to do
this,” Shelby said.

The administration has said it is working on a comprehensive
overhaul of the housing finance system which it plans to introduce next
year.

** Market News International Washington Bureau: 202-371-2121 **

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