April 27, 2010 11:36AM

The Case for Auditing the Fed

By Cato Editors

Recently, the Federal Reserve has significantly altered the procedures and goals that it had followed for decades. Rep. Ron Paul (R-TX) has introduced a bill calling for an audit of the Fed.

Remarkably, there is significant opposition to such oversight, and the political prospects for undertaking such an audit are relatively bleak. In a new paper, Cato scholar Arnold Kling examines the processes and outcomes on which an audit should focus, and looks at opposition to the audit:

We should document why the Fed took each step, what the expected results were, and whether those results were achieved. ...The profit or loss of the Fed's investments would provide a very helpful indicator of whether the Fed's actions served the economy as a whole or merely transferred wealth from ordinary taxpayers to bank shareholders.

Read the whole thing.