Considered as unfinished business. H.R. 24 — "To require a full audit of the Board of Governors of the Federal Reserve System and the Federal reserve banks by the Comptroller General of the United States, and for other purposes."
On motion to suspend the rules and pass the bill, as amended Agreed to by the Yeas and Nays: (2/3 required): 333 - 92 (Roll no. 504).
Motion to reconsider laid on the table Agreed to without objection.
The roll call is here to see how your Representative voted:
All Republicans voted "Aye" except for Rep. Campbell (and four not voting) along with a majority of the Democrats (but well less than ⅔ of their number) with 106 in favor 91 opposed and two not voting.
It would be highly unlikely for the Senate to take up the bill this late in the calendar.
Generally, the historical literature presents the period from 1817 to 1851 in Lower Canada (modern day Québec) as one of negative economic growth. This period also coincides with the rise of free banking in the colony. In this paper we propose to study the effects of free banking on economic growth using theoretical and empirical validations to study the issue of whether or not economic growth was negative. First of all, using monetary identities, we propose that given the increase in the stock of money and the reduction in the general price level, there must have been a positive rate of economic growth during the period. We also provide complementary evidence drawn from wages that living standards were increasing. It was hence impossible for growth to have been negative. Secondly, we propose that the rise of privately issued paper money under free banking in the colony had the effect of mitigating the problem of the abundance of poor quality coins in circulation which resulted from legal tender legislation. It also had the effect of facilitating credit networks and exchange. We link this conclusion to the emergence of free banking which must have been an important contributing factor. Although we cannot perfectly quantity the effect of free banking on economic growth in Lower Canada, we can be certain that its effect on growth was clearly positive.
The House of Representatives Committee on Oversight & Government Reform today passed by voice vote HR 24, the "Federal Reserve Transparence Act of 2014". More background and video of the hearing available here.
The substitute passed includes some substantive changes.
In the original text, Section 2 (b) (c) is changed from
"REPEAL OF CERTAIN LIMITATIONS.—Subsection 20 (b) of section 714 of title 31, United States Code, is 21 amended by striking the second sentence.
(c) REPEAL OF CERTAIN LIMITATIONS.—Subsection (b) of section 714 of title 31, United States Code, is amended by striking all after ‘‘in writing.’’.
I don't know offhand the significance of this change. Also from this:
(d) TECHNICAL AND CONFORMING AMENDMENT.— Section 714 of title 31, United States Code, is amended by striking subsection (f).
1. (d) TECHNICAL AND CONFORMING AMENDMENTS.—
2. 23 Section 714 of title 31, United States Code, is amended— (1) in subsection (d)(3)—
(A) in subparagraph (A)—
(i) by striking ‘‘or (f)’’;
(ii) in clause (i), by striking ‘‘or (f)’’; and
(iii) in clause (ii), by striking ‘‘or (f)’’; and
(B) in subparagraph (C), by striking ‘‘or (f)’’; and
(2) by striking subsection (f)
Also, the "SEC. 3. AUDIT OF LOAN FILE REVIEWS REQUIRED BY ENFORCEMENT ACTIONS" has been struck from the original text:
SEC. 3. AUDIT OF LOAN FILE REVIEWS REQUIRED BY EN- FORCEMENT ACTIONS. (a) IN GENERAL.—The Comptroller General of the United States shall conduct an audit of the review of loan files of homeowners in foreclosure in 2009 or 2010, re- quired as part of the enforcement actions taken by the Board of Governors of the Federal Reserve System against supervised financial institutions. (b) CONTENT OF AUDIT.—The audit carried out pur- suant to subsection (a) shall consider, at a minimum— (1) the guidance given by the Board of Gov- ernors of the Federal Reserve System to inde- pendent consultants retained by the supervised fi- nancial institutions regarding the procedures to be followed in conducting the file reviews;
(2) the factors considered by independent con- 2 sultants when evaluating loan files; 3 (3) the results obtained by the independent con- 4 sultants pursuant to those reviews; 5 (4) the determinations made by the independent 6 consultants regarding the nature and extent of fi- 7 nancial injury sustained by each homeowner as well 8 as the level and type of remediation offered to each 9 homeowner; and 10 (5) the specific measures taken by the inde- 11 pendent consultants to verify, confirm, or rebut the 12 assertions and representations made by supervised 13 financial institutions regarding the contents of loan 14 files and the extent of financial injury to home- 15 owners. 16 (c) REPORT.—Not later than the end of the 6-month 17 period beginning on the date of the enactment of this Act, 18 the Comptroller General shall issue a report to the Con- 19 gress containing all findings and determinations made in 20 carrying out the audit required under subsection (a).
Again, I'm not sure offhand what, if any, are the significance of these changes, but I do know the devil is in the details!
The New York Department of Financial Services (NYDFS) has issued new proposed proposed BitLicense rules and regulations that would curtail not encourage digital currencies like Bitcoin.
Many years ago when I first started in Rep. Ron Paul's office, I initiated and led a fight against a similar anti-money laundering proposal called "Know Your Customer" which would have increased regulations, violated financial privacy and threatened currency competition. Lots of background on that fight here.
I and other bloggers here have written a lot on how the anti-money laundering regulations do more to inhibit currency competition now than legal tender laws do. Lots of background here. Check out Larry White's talk about these issues at Cato too:
The Chamber of Digital Commerce is calling on the Bitcoin community to submit comments to the NYDFS. Instructions on how to submit comments can be found on the NYDFS website at http://www.dos.ny.gov/info/register.htm. More on the new Chamber of Digital Commerce here.
A new digital currency trade association is fighting the regulations. Their press release can be read here:
“One egregious aspect is that the NYDFS is only giving 45 days to comment, which is severely inadequate to proposed regulations of this scope” said Perianne Boring, President of the Digital Chamber. “We are requesting that the NYDFS extend the comment period through the end of 2014, to allow the industry adequate time to properly review and respond.”
When fighting the KYC proposal, I generated 300,000 comments against the proposal (with only 105 in favor). Let's organize those groups and experts interested in these issues to figure out how to fix this proposal now: contact me at bjansen @ financialprivacy.org and stay tuned here if interested in joining this fight!
Kudos for the NYDFS for being pro-active to secure a legal path to digital currency use, but the proposal as written would do much more harm than good. Let's hope they are open to making sure they get this right and don't end up shifting digital currencies and other financial innovations away from New York. Even more thanks go out to Perianne Boring for her efforts!
Now is the time to stand up and make the world (well, at least New York) safe for digital currencies and alternatives to the Fed!
EDIT: the new proposed rules are now online here (scroll to page 14):
A nice debate has started brewing about the records of Presidents Jimmy Carter versus Ronald Reagan on spending--thanks to US Sen. Rand Paul who again seems to be setting the terms of the debate.
Mother Jones has published a video of Rand taking issue of spending rising faster under Reagan that it did under Carter.
MSNBC has publicized the video through an interesting story here saying, in part:
It’s worth emphasizing, in case details like these make a difference, that Paul’s criticism of Reagan’s fiscal record happened to be accurate. The budget deficits were smaller under Carter than Reagan. Federal spending grew slower under Carter than Reagan, too.
But to put it mildly, Republicans don’t want to hear any of this, and they tend to be thoroughly unhappy when anyone compares Reagan unfavorably to Carter, even when the analysis is true.
After Corn’s piece ran, Paul’s office issued a statement to Mother Jones, noting, “I have always been and continue to be a great supporter of Ronald Reagan’s tax cuts and the millions of jobs they created.”
Reason has now got into the act with a story here. They basically confirm that Rand's facts are right before concluding, "The short version: Reagan spent like a drunken sailor and skipped out on the bill."
They even include a handy chart from Veronique de Rugy at Mercatus from here report here
Reason sums up Veronique de Rugy's (in full disclosure, she is part of the Board of the think tank that runs this blog) numbers:
As de Rugy does the math, Carter increased real spending 17 percent over the last budget of his predecessor, Gerald Ford. Over two terms, Reagan increased spending by 22 percent over Carter's final budget. On an annualized basis, then, Carter grew spending by 4.25 precent a year, while Reagan grew it by 2.75 percent. However, when expressed as a percentage of GDP, spending under Carter averaged 20.6 percent per year while Reagan averaged 21.6 percent. Spending typically really gears up in a second-term president's final years, so it's plausible to theorize that had Carter managed to stick around for eight years, he might have equaled or surpassed what the real-world Reagan managed.
For those still reading along, thanks, and you might be asking, what if anything does this have to do with free banking? Well, I would like to posit that it is at least tangentially related in that from what I remember from the early days of the Reagan Administration, he cut a deal with Congress on spending that would have had nominal growth but real cuts based on then projected inflation. The blame then goes to Federal Reserve Chairman Volcker for slaying the inflation dragon much faster than anticipated so that the projected real spending cuts became real spending increases.
The St. Louis Fed published a paper by Keith W. Carlson in January/February 1989 entitled "Federal Budget Trends and the 1981 Reagan Economic Plan" (pdf) explaining that "prices were generally increasing at double digit rates." The paper goes on to illuminate my point:
The 1981 administration forecast for inflation for the 1980—86 period was a 7.1 per-cent annual rate; the actual inflation rate during this period was 5.1 percent.
So, in conclusion, yes, Rand Paul is right to raise spending as an important economic issue and take sacred cows out for fair examination--but let's not forget that the Federal Reserve deserves its share of blame both for confusing economic planners as well as monetizing budget deficits.
Larry White and George Selgin and Jerry Dwyer will be speaking at the Heritage Foundation tomorrow.
The Federal Reserve at 100: How Well Has It Done?
Has the Federal Reserve functioned as it was intended? How well has the Fed managed the economy and calmed business cycles? Do its successes outnumber and outweigh its failures? Join us as leading experts address these and other important questions.
My call to repeal the anti-money laundering laws got published in the current issue of the Cayman Financial Review. In "Repeal the anti-money laundering laws" I explain how the AMLs stifle currency competition. I concluded:
There are political costs to consider. The increased scrutiny of politically exposed persons and sanctions greatly complicate AML compliance, increase costs and can cause unintended political by-products. In addition, to the extent the AML programs are successful, they can divert funds away from monitored channels to places with no financial intelligence. Iran trades with gold marginally reducing demand for the U.S. dollar in international trade. Individual Iranians use bitcoins as an alternative to their currency instead of the U.S. dollar. Just recently, the Cuban interest section in Washington, D.C. is closing for lack of legitimate banking options because of AML and FATCA compliance concerns.
AMLs stifle needed new payment systems such as bitcoin. Less regulated industries such as technology are adapting much faster than the financial system. Actors in the financial industry are often late adopters to quickly changing technologies. On the other hand, new electronic monies have been less regulated (though this is changing).
It is bitcoin, Liberty Reserve and others that are allowing faster and cheaper mobile payments to more of the world’s population, including the unbanked, than has ever been possible. These changes mean more money is reaching the people who need it most ─ and faster including situations when lives depend on it. Grafting a failed AML approach from the polyester-wearing disco music era onto the fast changing 21st Century technologies can’t end well.
In conclusion, as I cited in my 2001 Congressional testimony on what became the USA PATRIOT Act, money launderers do not have a statistically significant chance of being caught so the deterrent effect of our AML approach is negligible. Only a minuscule fraction one percent of CTRs and SARs result in criminal convictions. I know of no examples where AML reports prevented any terrorist events.
Our AMLs are a failure: the drug trade continues unabated, financial fraud is more prevalent now than ever, and terrorist groups continue to finance their operations. The greatest tragedy is what everyone knows and policymakers don’t seem to care: it is the unbanked, the poor, and the racially and ethnic minorities in rich countries (and the populations of poorer countries) that suffer these costs for such elusive benefits.
Time to reboot our AML policies to aid law enforcement, encourage innovation, cut costs and protect privacy and other human rights.
On a humorous personal note, the original story ran with a bio that added a "g" to the end of my dot org email address before I got it corrected.
Relatedly, Larry White made many of the same points in his talk at the Cato Monetary Conference last year. Video here.
Edit: The American Banker has a white paper out calling for reform of the AMLs making similar arguments to mine. They want to "modernize" them "using predictive analytics to pinpoint suspicious activity."
As I noted in a recent post, the prolific Ralph Benko gave mad props (which was what I understood kids were saying when praising someone or something last time I was even attempting to keep up on pop culture) to Freebanking.org blogger Kurt Schuler. Well, he's at it again, so thanks again to Ralph for acknowledging Kurt's work.
before going on to explain the Bolshevik's plans for printing lots of money not to fill their coffers but to destroy the value of money for payment. Lenin thought work, and work alone, should be used--because, you know, evils of capitalism, etc. (This makes me wonder if some of the work-based hourly valued local currencies such as the Ithaca hours were inspired by this idea. Before digressing too much, note to self, write blog post on Marx and Hayek.)
Ralph's post concludes:
Lenin's savage statements toward money may have been a blend of ignorance and rationalization. White and Schuler: "the underlying rationale for the argument was subsequently explained by the historian E. H. Carr in a brief memorandum for Fetter (1977, p. 78): 'None of the Bolsheviks wanted, or planned, inflation. But, when that happened (since the printing press was their main source of revenue) they rationalized it ex post facto by describing it as (a) death to the capitalists and (b) a foretaste of the moneyless Communist Society.'"
As vikingvista pointed out in a comment on my last Bitcoin post, the reporting on this issue often has little to do with reality. In this example, after the central bank of Thailand issued a warning about Bitcoin that was reported by some as "Thailand Bans Bitcoin" which wasn't entirely accurate, as the Library of Congress explained:
"According to news reports, the Bank of Thailand ruled the bitcoin illegal on July 29, 2013.128
However, it appears that “it issued a preliminary ruling that using bitcoins . . . was illegal
because of a lack of existing laws” in the case of a currency-exchange license application by
Bitcoin Co. Ltd. Other businesses that have licenses have continued operating bitcoin exchanges
On the one hand, some libertarians/digital currency enthusiasts pretty much equate the advent of Bitcoin as manna from Heaven. On the other hand, some like Paul Krugman equate it with a harbinger of the end of (Progressive) Western Civilization as they know it. Hype is hype, and I'll leave it at that. More notable has been the counter-factual reporting on Bitcoin--on both sides.
AmongTech posts that the Reserve Bank of India, "Dogecoin recognized as official currency by Bank of India." They explained:
The online currency based on the famous internet meme “Shibe” or Doge has been recognized as an official currency by the Bank of India. It has also recognized similar online currencies such as Bitcoins and Litecoins as official currency.
The creation, trading or usage of VCs including Bitcoins, as a medium for
payment are not authorised by any central bank or monetary authority. No regulatory
approvals, registration or authorisation is stated to have been obtained by the
entities concerned for carrying on such activities. As such, they may pose several
risks to their users . . .
The RBI press statement could hardly be construed as recognizing Dogecoin an "official currency." No, the sky isn't falling, but nor are the streets paved with gold.