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Senate votes to examine Federal Reserve lending

By Jim Kuhnhenn
Associated Press / May 12, 2010

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WASHINGTON — The Senate voted unanimously to peer into Federal Reserve decision-making yesterday, authorizing an examination of the US central bank’s emergency lending to financial institutions in the months following the 2008 financial crisis.

Passed 96-0 as an amendment to a comprehensive financial regulation bill, the measure requires a one-time audit of more than $2 trillion in lending and the disclosure of all recipients. A proposal for a broader review of the bank failed.

The vote came as the Fed ramped up its emergency program to keep a European debt crisis from spreading further. In a sign of the central bank’s sensitivity to congressional scrutiny, its chairman, Ben Bernanke, promised weekly reports on its efforts to help protect the euro.

The Fed has become a target of public anger in the aftermath of Wall Street’s near meltdown in late 2008, taking blame for not seeing the coming collapse and for having what some perceive as too cozy a relationship with the nation’s largest institutions. That, coupled with its closely guarded lending, has created a bipartisan environment to get the Fed to open up.

“The Fed can no longer operate in the kind of secrecy that it has operated in forever,’’ said Senator Bernard Sanders, a Vermont independent and the main author of the audit amendment.

Senate Democrats also rejected a GOP proposal to end the government’s support of mortgage giants Fannie Mae and Freddie Mac. Instead, the Senate voted to instruct the Treasury to recommend how the government can end its relationship with the two housing finance companies.