Grandstanding

The video of Rep. Alan Grayson grilling the Inspector General of the Fed Board of Governors, Elizabeth Coleman, has been making the rounds. Grayson says that there's a Bloomberg article which says that the Fed has entered into $9 trillion of off-balance sheet transactions, and asks Coleman if she has investigated those transactions at all. After Coleman fumbles around for a while, she essentially says no. Grayson makes himself look good in this video, especially because Coleman's performance is so bad, but this is grandstanding of the highest order. First of all, the Bloomberg article never said that the Fed has entered into $9 trillion of off-balance sheet transactions. This is the article he was talking about, and the phrase "off-balance sheet" doesn't appear once. And the $9.7 trillion number refers to all money spent, lent, or guaranteed during the financial crisis by the Fed, Treasury, and FDIC. It's also very misleading, because lending $1 billion isn't the same as guaranteeing $1 billion in assets, and $5.7 trillion of that $9.7 trillion is in the form of guarantees.

Second, Coleman is the IG of the Board of Governors of the Federal Reserve, not the Reserve Banks. The Fed's various lending facilities are handled by the New York Fed, and Coleman has no authority to audit the New York Fed or any of the other regional Reserve Banks. All the regional Reserve Banks have auditors, and they're all subject to regular external audits as well. Until a few years ago, the Board of Governors conducted examinations of the Reserve Banks in lieu of external audits. But some people thought that was too insular (and I completely agree), so the Board of Governors' examinations were replaced by external audits. Ironically, if there hadn't been concerns about the independence of the Board of Governors' examinations of the Reserve Banks, Coleman might have been able to answer Grayson's questions.