FED: can a state governor / legislature try to audit one of the Federal Reserve branches?

___j___

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The long term goal is end the Fed, as the phrase goes, which can only be accomplished by the federal congress ... not to mention repeal of the 16th which can only be accomplished by Constitutional amendment (setting the tax code flat and then gradually driving the percentage towards zero would be a good first step) ... but one of the short-term goals which has been gaining traction over the last year or so is *auditing* the Fed.

Up until yesterday, I've always assumed that only the federal legislature could make that audit happen (or maybe a president could do so via the hated Executive Order trick). But then I wondered, since there are actually district offices of the Federal Reserve System spread in various places throughout the country, why not have some liberty-leaning state governor and/or state legislature fire the first shot, and audit their local Fed branch? Almost all the state governments have some sort of Bureau Of Consumer Protection and/or Commissioner Of Banking Industry Regulatory Board, usually under the governor. Can they not impose their regulatory will upon any private entity they pick, which is located within the bounds of their jurisdictional domain?

I realize this scheme is in some ways using the Dark Side (overburdensome arbitrary regulatory overreach -- albeit at the state rather than federal level) in an attempt to Do Something Good. Therefore, I welcome three specific sorts of comment -- plus of course other sorts if you wish, these categories are just meant to stimulate thought -- first, commentary on whether even attempting this sort of thing would be useful in the long run rather than backfire or otherwise blow up in our faces.

Second, commentary on the technical / legal / political / practical feasibility of such an attempt. What are the specific obstacles?

Third, specific governors who might be convinced to try and audit their local Fed ... since even if it turns out the idea is "infeasible" for some reason -- e.g. maybe it turns out that some governor tried this once and the federal executive branch blocked them handily without even really trying -- that still doesn't mean making the *attempt* is a bad idea, since any such attempt would likely generate a lot of press coverage, and get more citizens exposed to the idea that maybe the Federal Reserve isn't really the presumed-benign nigh-invisible body it wished to be.

http://en.wikipedia.org/wiki/Federal_Reserve_Bank#Legal_status
States with Fed branches: AL AR CA*2 CO FL*2 GA IL KS KY LA MA MD MI MN MO MT NC NE NY OH*2 OK OR PA*2 TN*2 TX*4 UT VA WA.

Of course, the Fed branches are largely just regulatory entities, that are tightly intertwined with member-banks ... and those member-banks are not (on paper) quasi-governmental, but private. Theoretically, one could thus audit some particular Fed branch indirectly, by auditing all the member-banks thereof, and then reverse-engineering what the Fed branch had been doing.
 
Their best shot would probably be to audit the Kansas City branch since Kansas' legislature overwhelmingly voted to nullify Federal gun control and their Governor signed the veto-proof legislation into law. One of their U.S. Senators also cosponsored the Senate version of the Audit the Fed bill. Not sure if their Governor has learned much about the Fed since he argued with Ron about it back in 2007 though.
 
Kansas ... One of their U.S. Senators also cosponsored the Senate version of the Audit the Fed bill. Not sure if their Governor has learned much about the Fed since he argued with Ron about it back in 2007 though.

The current KS gov is Sam Brownback, and he was previously a senator too -- he claims in this video to have voted for "more audit and disclosure" regarding the Fed when he was a senator, so perhaps he is also the very same senator you were thinking of? http://www.youtube.com/watch?v=MgPFgjXx1uc#t=108s Also in the video, though, which is from a few months ago, he explicitly says he doesn't plan on doing anything further regarding the Fed in his current position (governor), mentioning that he has a lot of other fish to fry, and also explicitly praising some folks who work in the Kansas branch of the Fed. I like the nullification of anti-2nd-amendment federal laws, but I don't think his rock-solid pro-gun stance extends to cover a rock-solid anti-fed stance as well.

Brownback's first term as gov is up in 2014 -- so for the sake of argument, say that Huelskamp (usRep R-KS who tried to oust Boehner as speaker in January this year) challenges Brownback and wins. He is definitely fully in favor of auditing the fed -- http://huelskamp.house.gov/index.php?option=com_content&task=view&id=4108&Itemid=300123 But could he *do* it, as governor?
 
The current KS gov is Sam Brownback, and he was previously a senator too -- he claims in this video to have voted for "more audit and disclosure" regarding the Fed when he was a senator, so perhaps he is also the very same senator you were thinking of? http://www.youtube.com/watch?v=MgPFgjXx1uc#t=108s Also in the video, though, which is from a few months ago, he explicitly says he doesn't plan on doing anything further regarding the Fed in his current position (governor), mentioning that he has a lot of other fish to fry, and also explicitly praising some folks who work in the Kansas branch of the Fed. I like the nullification of anti-2nd-amendment federal laws, but I don't think his rock-solid pro-gun stance extends to cover a rock-solid anti-fed stance as well.

Brownback's first term as gov is up in 2014 -- so for the sake of argument, say that Huelskamp (usRep R-KS who tried to oust Boehner as speaker in January this year) challenges Brownback and wins. He is definitely fully in favor of auditing the fed -- http://huelskamp.house.gov/index.php?option=com_content&task=view&id=4108&Itemid=300123 But could he *do* it, as governor?

Yeah, I'm not sure if a Governor can actually do what you're suggesting, or not. I'm guessing he could try, and the Feds would try to stop him and things could get confrontational. I didn't know Brownback argued for auditing the Fed. The Kansas Senator I was thinking of is Jerry Moran.

Personally, Gov. Brownback may not want to do it, but if the people were able to pressure the State Legislature to pass veto-proof legislation requiring him to do it, then he might not have a choice. The Legislature could simply override his veto.

BTW, I noticed David Brownback was on the Board of Directors for the Kansas City Fed. Any relation to Sam? Looks like his term expired in December 2012 though. So I'm not sure if he's still on there or not.
 
A state can REQUEST an audit of a federal institution, but they cannot just go out and conduct their own audit.
 
A state can REQUEST an audit of a federal institution, but they cannot just go out and conduct their own audit.

Well, arguably you are correct ... but remember that the Fed is only quasi-governmental, it wants to pretend to be private and independent rather than a tool of the dominant twin-parties ... hence my question. See the wikipedia link in the OP about the public-vs-private nature of the Fed -- http://en.wikipedia.org/wiki/Federal_Reserve_Bank#Legal_status

Here is something semi-relevant that turned up when googling -- http://www.mass.gov/governor/pressoffice/pressreleases/2013/0117-military-base-energy-audits.html Deval Patrick is governor of MA, and at least from the sounds of this press-release, is trying to take credit for 'auditing' the energy use of Hanscom AFB (among others). The article pretty clearly says that the funding for the effort is coming from some kind of 2011 massachusetts-state-law ... but is unclear on who *authorized* the actual audits. One place I did *not* expect to see external independent auditors going was the Pentagon -- here is a 73-page PDF from 2009 describing the designed-for-pork accounting system used by the DoD and their internal auditors, see especially page 15 which contrasts DoD/DHS/HHS/etc internal audit expenses -- http://www.grassley.senate.gov/about/upload/Defense-09-15-10-Oversight-Review-of-OIG-Audit.pdf Therefore, it was pretty surprising to see Gov. Deval bragging about forcing the USAF to conduct energy-audits.

But unlike the DoD and USAF, the USPS and especially the Fed, are not rock-solid as purely-federal entities. The USPS is a place that I was pretty sure *would* have been subject to an actual (or at least attempted / threatened) external audit by independent outsiders. Typically though, just like the Fed, all the USPS audits are conducted internally, by either their USPIS subdivision or by the OIG subdivision. Final reports are sent to the press -- http://www.washingtonpost.com/blogs...to-do-nothing/2011/08/26/gIQA6b9nmJ_blog.html -- which then lovingly explains how paying USPS workers to take all-day coffee breaks has 'improved' recently, and then indirectly beg for more taxdollars. Has no governor, or mayor for that matter, ever marched some city cops into the local post office, and demanded a copy of the accounting records? Much like the Fed, the USPS is allegedly quasi-governmental on paper (www.usps.com remains but www.usps.gov was recently eliminated for instance -- pure PR move, but the illusion and the perception *do* matter methinks).

Along the way, I also turned up some propaganda from the Missouri branch of the Fed, saying that they already do (internal) audits -- http://www.stlouisfed.org/about_us/federal_reserve_audit.cfm Probably the most interesting number is the claim that 425k billable hours are spent per year on internal audits, which with min-wage-auditors would still be $3m/yr, and according to glassdoor dot com the average salary for an internal bank auditor position in the USA works out to be 26.50/hr ... internal secret audits of the Fed are already costing us over $10m/yr. Drop in the bucket compared to HHS/DoD/etc, but still. More interesting than the price-tag, perhaps, is the security implications of that number of billable hours: several hundred people must have access to at least a portion of the raw materials used during internal audits of the Fed... and it only takes one whistleblower to hand over some juicy raw data from the internal audit paperwork to Ben Swann, after which his truth-in-journalism can help create an internet sensation out of the issue.
 
One of basic principles of life:
The strong did what they can and the weak suffer what they must.

If Governor or state legislature is strong enough they could do it... everything else is just pointless debate. If they are strong enough they will find legal political and any other reason.
 
They lack authority over Federal entities.

"Authority"? The federal government doesn't respect the states' constitutional authority on many issues either. Why should the states be compelled to respect federal authority when it comes an audit of the Federal Reserve Systeme when the federal government is consistently violating states' authority?

And that's not even what I was asking. I said:

Why not? What stops them?

A piece of paper certainly not.
 
p.s. Whew, this is a long post. I really intended to just briefly hit the top ten, but the more I listed, the more I thought of.

Mr. Ness, everybody knows where the booze is. The problem isn't finding it, the problem is who wants to cross Capone.

p.p.s. If you like Connery, there was a pretty decent movie -- the Untouchables -- playing through my head while I wrote this up. http://www.imdb.com/character/ch0003953/quotes

Why not? What stops them?

It is a piece of paper that stops "them" (whom I'll refer to as Governor Foo during this post... but 'them' could also be a state legislature as a body, or perhaps the state attorney general) from actually doing anything, most of the time. But the exact obstacle that keeps any particular 'them' shaking in their boots may differ. Here is the list of obstacles I have come up with:

obstacle#1. lack of knowledge -- most people, like ZippyJuan, see this as almost a nonsense-question, because they think the state-govt surely has no power over the fed-govt. I myself am not sure the question is *not* a nonsense-question, with the obvious-well-duh answer. But the more I thought about it, the more unsure I became, so I figured I would ask. So: lack of knowledge is an obstacle for us folks here on the forums trying to understand what the right answer is, but it is also an obstacle to Gov. Foo of XX, who might wonder if they can personally end the fed, or even merely audit the fed, and then decide they cannot (but their decision is based on lack of information -- at least potentially).

2. lack of guts aka fear of rocking the boat -- most governors would not audit their local Fed, even if they thought they could, because of fear. But even to become governor, they need *some* guts, so let us list their fears.

3. fear of media backlash, aka bad press

4. fear of citizen backlash, aka angry constituents

5. fear of party backlash, aka angry insiders & angry coworkers at the state-govt level & angry colleagues in others states or at the fed-govt level

6. fear of funding backlash, aka loss of donations (methinks this is a *very* big one on the list -- only the super-wealthy hyper-political donors actually *benefit* from the Fed's inflation ... but those same folks often are the true funding behind an expensive slot like a campaign for the governorship)

7. fear of funding redirection, aka more donations for the opposing party and/or for primary insurgency candidates in their own party (again a *very* large fear methinks ... even if you are very wealthy yourself, or if your existing major backers support your audit-the-fed initiative, you still have to worry about some very deep pockets funding your opponents in the next cycle)

8. fear of impeachment, which could happen based on obstacle#4 in states with governor-recalls, or based on obstacle#5 in states where the state-legislature has that power (and note that Gov. Foo is right to worry about about the risk of impeachment ... even if auditing the local Fed is not grounds for impeachment, there is going to be *some* impeachment charge that might be trumped up ... or in really corrupt states, maybe the only way you can get to *be* governor is if your big financial backers already have your heart in a jar on their bookshelves, figuratively speaking)

9. fear of arrest / bail / court / conviction / jailtime. Note that, for a sitting governor, even the *insinuation* that the governor might be arrested/etc is enough to keep them from being trusted. However, obstacle#9 is distinct and separate from obstacle#3, because even if it turns out that the governor is doing nothing illegal, they will still get Bad Press ("governor foo obviously hates blind orphans since she wasted $1m attacking the great and noble Fed just before she vetoed the $1m-for-blind-orphans-bill last week"). But as bad as that is, still worse is "federal A.G. says gov Foo allegedly committed 6,352 felonies yesterday" ... which even if it turns out to be 100% false, and is repudiated the very next day, will still prolly kill gov foo's chances at re-election, to any office, ever. As for actually *going* to jail -- many of the current residents blame the governor for putting them in jail, and/or for failing to pardon their convictions. Not good!

10. fear of looking foolish and losing face -- when the governor says "the Fed is never audited" and then Obama and 25 other governors and 50 senators and 100 reps all go on TV and explain that, so sorry Governor 'moron' Foo but we must correct you millions of virtual times in public, the Fed is audited by cough-itself-ahem independent certified auditors, 1000 person-hours a day

11. fear of losing the battle and thus losing face -- when the governor says in public "I'm auditing the Fed" and then fails to do so (no matter what the reason!), they lose face.

12. even if the governor decides to audit the Fed, can they get help from their own state legislature? If not, the state-legislature is definitely a passive obstacle (and could easily become an active obstacle if they decide to try and thwart the governor's plans)

13. even if the governor decides to audit the Fed, can they get help from their own state-executive-branch colleagues? If not, the state A.G. might end up suing the governor, and the sec-state and/or LtGov might go on teevee and tell the constituents back home that the governor is bonkers ... some of them might even resign, if the governor insists on going through with this thing.

14. even if the governor decides to audit the Fed, can they get help from their own federal-level colleagues? If not, the senators and reps of the great state of XX can really make problems for governor Foo, because most of them are well-known and highly-respected throughout the state.

15. even if the governor decides to audit the Fed, can they get by with just semi-passive resistance from the federal-level executive branch, and the federal-level agencies? Expecting that the prez and the various agency-heads will actually *help* the governor audit the Fed is unlikely in the extreme (barring the inauguration of Paul'16 or equivalent) ... but if they decide to actively oppose the move, they absolutely have the power to do so. They might send in the marines, or simply nuke the great state of XX ... but more likely is semi-subtle but still semi-active resistance, such as the president issuing a direct order to the local cops that following orders from the governor to trespass on federal property will get them fired, or ordering (perhaps secretly) the 'normal' employees at the fed not to cooperate, or ordering (definitely secretly and prolly through a patsy to gain plausible deniability) the NSA to simply doctor the data ... either before the governor gets it, or even afterwards ... plus probably a million other more subtle tricks that I have not thought of.

16. even if the governor decides to audit the Fed, can they get help from their own employees? If not, then the governor is in *real* serious trouble, because internal sabotage (or merely internal sloth) could easily kill the entire project. Which brings us to a new type of obstacles.

17. assume the governor has enough helpers to actually send a cop over to the local Fed branch, and bang on the door, demanding accounting-records for an external independent audit. What if the cop gets there, and they lock the doors?

18. What if the cop gets inside, and they won't unlock the file-cabinets, or type passwords into the computers?

19. What if the cop gets inside, but they won't let the cop leave with any copies?

20. What if they give the cop incomplete and/or falsified records? What if there is a second set of accounting-books, in other words, either by standing Fed policy, or put together just for the special occasion?

21. What if they give the cop the true records, full of incriminating evidence that makes the Fed look really bad... but then make those selfsame records *look* falsified, later, and blame the cop and/or governor for attempting to frame the good and noble Fed, with tainted evidence? (This one may seem far-fetched... but it's really not... because the point is, just getting the audit-trail is not really enough to prove anything, unless we are *very* careful to document how we got that audit-trail, and that nobody tampered with it after it left the hands of the local Fed workers.)

22. What if they give the cop the true records, but then sue to keep them out of the press? You know, for national security reasons, or executive privilege, or whatever fake reason they pick.

23. What if they give the cop the true records, but the information is ambiguous / unclear / whatever, and we cannot reliably use it to point the finger of blame? Again, this is not far-fetched, though it might seem so at first glance... there are real reasons why the tax-code is kept so complex, not the least of which is to keep citizens from figuring out how badly they are being milked. Presumably at least *some* of the 'normal' employees at the Fed are average citizens, not evil financial-genius masterminds, so the same need for complexity applies: in order to keep Fed worker bees from figuring out how badly the Fed is milking the citizenry, the storage-format and the data-contents of the *true* records will be fiendishly baroque. Figuring out what they mean might be impossible, without specialized help... and getting that specialized help is a very large obstacle.

24. What if we get the info, and we understand it, and we can see it is damning evidence of ... something minor? See also, obstacle#3 and obstacle#10 and obstacles#12-thru-16, then imagine those forces being applied to the task of convincing the public that the audit by governor foo's external third-party accountants turned up some typos, and yes even some misdemeanors, but all the hullaballoo was just a publicity stunt by governor foo, that complex credit-swap stuff was actually benign, and we can obfuscate the discussion over there, and obscure the point over here, and drag out the debate for longer than thirty seconds which is the attention-span of the average american... erm, what? Are we *still* talking about this boring stuff?

obstacle#25. Insert your own ideas for risks-slash-obstacles to success here.

Although I hate to say it, methinks the *biggest* risk is that we'll overcome all the obstacles, and reveal the true nature of the Fed, and even make the citizenry understand that true nature... but will still end up losing, because 51% of the one third of them that bother to actually vote will not *care* enough to change their habits, and will go back to slumbering, until too late to turn back. So I suppose the biggest risk, in some sense, is that we'll manage to pull off an audit of the Fed ... and succeed too soon, before the nation is ready to accept the systemic problems, face them honestly, and truly fix them. Sigh.

Along the same lines, there is always an opportunity cost: auditing the Fed is a big job, and even if you win (which possibility is fraught with risk as enumerated above) you still spent time and effort and dollars that *could* have been spent helping blind orphans, or expanding the governor's residence, or blown on cheap booze, or saved for paying down the deficit, or whatever. This applies to Governor Foo, of course, but it also applies to us here in the forum: instead of talking about the Fed, we could be out going door-to-door for the 2014 elections, or making liberty leaning comments at huffpo and wapo and all the other po's, or whatever. I'm not trying to discourage anybody from commenting on this thread further (quite the opposite), but I'm reasonably convinced that there is no currently-sitting governor who would be willing to take on a job like this. Maybe if Kurt Bills were elected governor of Minnesota, this idea will be insta-relevant....
 
A state can REQUEST an audit of a federal institution, but they cannot just go out and conduct their own audit.

but its a private bank, with private employees, and private documents.
the only federal part of the federal reserve is the board of governors, what are their names?
 
Not a private bank. But here is a list of the Board of Governors for you:
http://www.federalreserve.gov/aboutthefed/bios/board/default.htm

Board Members

Ben S. Bernanke, Chairman
Janet L. Yellen, Vice Chair
Elizabeth A. Duke
Daniel K. Tarullo
Sarah Bloom Raskin
Jeremy C. Stein
Jerome H. Powell
Members since 1913

The seven members of the Board of Governors of the Federal Reserve System are nominated by the President and confirmed by the Senate. A full term is fourteen years. One term begins every two years, on February 1 of even-numbered years. A member who serves a full term may not be reappointed. A member who completes an unexpired portion of a term may be reappointed. All terms end on their statutory date regardless of the date on which the member is sworn into office.

The Chairman and the Vice Chairman of the Board are named by the President from among the members and are confirmed by the Senate. They serve a term of four years. A member's term on the Board is not affected by his or her status as Chairman or Vice Chairman.
 
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