According to Deloitte & Touche, which conducts a conventional audit of the Fed's financial statements, the Fed spent $6.1 billion for operating expenses in 2013 and an additional $5.2 billion in interest paid to banks. The audit I would like to see would assess whether those payments are reasonable and necessary or whether they raise conflicts of interest between the Fed's role in monetary policy and its role as a bank regulator.
The Constitution is explicit in assigning responsibility for money to Congress, and it is particularly blunt when it says: "No money shall be drawn from the Treasury but in consequence of appropriations made by law." None of the payments made by the Fed are pursuant to appropriations, but the Fed's actions facilitate the continued growth of the national debt, which is putting our economic future at risk.
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The Fed crows that it earns interest and has made great profits on its portfolio. But that's just one part of government lending to another part. There's no value creation. It's like charging interest to your spouse and counting it as family income.
The assets are bought not with real capital but with "computer-entry" fictions. The danger is that, at some point, the market will become aware that quantitative easing is an illusion and that the Fed can't cause growth or maintain calm, zero-interest markets with more computer-entry purchases.
Danger exists also in a market in which the most universal of prices, the price of money, is so manipulated as to lose its essential feedback mechanism. Danger exists in a market that is deprived of the information that freely floating interest rates provide.
