Sen Rand Paul: There are 186 billion reasons we must audit the Fed

Senator Rand Paul, R-Kentucky, has always been a proponent of fiscal responsibility and government transparency, and his recent op-ed is pulling back the curtain on the Federal Reserve.

The editorial, published by Fox Business, yet again demands an audit of the Fed, with the senator saying there are” $186 billion reasons” to do so.

“No other institution has so much unchecked power. Look no further than the unlimited authority the Fed used in response to the COVID-19 pandemic,” he wrote. “The Fed printed money, purchased government-backed securities, and doled out massive amounts of money to favored industries. These actions added almost $5 trillion in debt to the Fed’s balance sheet.”

But those at the Federal Reserve will not be honest unless forced to do so, Paul reasoned.

“To be clear, representatives of the Fed are only interested in transparency to the extent it gives them political cover. Because, to them, the opacity of the Fed is a feature, not a bug, and their leadership considers secrecy to be a great asset,” he said. “If you ask them, accountability to the American people and to the taxpayers who prop up their financial house of cards is actually bad. From the Fed’s perspective, to even question this arrangement is in some way harmful or dangerous.”

“Our country is now over $37 trillion in debt. Not enough people in Washington are willing to say ‘no’ because they don’t want to stop spending other people’s money — the ‘other people’ being future generations of Americans who are defenseless against the voices of the present as they ask for tomorrow’s money today,” the piece continued. “The Fed owns a share of responsibility for this, as their machinations and manipulations help perpetuate this unsustainable state of affairs, but with increasing difficulty each year.”

He points to the giving of ” hundreds of billions of dollars” that was “unnecessarily paid to banks to not lend money to consumers.”

“For nearly a century, the Fed paid no interest to banks for holding Federal Reserve in those banks’ deposit boxes, but all that changed in the wake of the 2008 financial crisis,” Paul explained. “Paying interest to banks for holding Fed funds was originally intended to control inflation. And from 2008 to 2016, the interest rate on reserves was a paltry 0.25%, and annual payments averaged $5 billion.”

More from the op-ed:

In 2022, the Fed paid nearly $60 billion to banks. In 2023, the Fed payments to banks rose to over $176 billion, and in 2024, the Fed’s subsidy to banks rose to about $186 billion. And 44% of these subsidies are paid to foreign banks.

It gets worse. The Fed is not profitable and hasn’t been profitable for several years. In fact, I have argued that the Consumer Financial Protection Bureau, the leviathan agency that infamously receives funding from the Fed, should be shut down because the Fed has been operating at a loss since 2022.

One of the major reasons the Fed has continued to operate at a loss is because of its economically illiterate commitment to making these interest payments, which are entirely discretionary and not required.

The Fed has authority to reinstate reserve balance requirements and ensure banks would not be entitled to these interest payments. In the meantime, the Fed is choosing through its policies to make its losses worse than they need to be.

Paul closes out the piece by demanding an audit of the Fed and promoting his “End the Fed’s Big Bank Bailout Act,” which he says will “terminate the Federal Reserve’s subsidy to big and foreign banks by prohibiting the payment of interest on reserve balances.” It even has the bipartisan support of Senator Bernie Sanders, I-Vermont.

“U.S. Secretary of Treasury Scott Bessent indicated on July 21 that we need to ‘examine the entire Federal Reserve institution and whether they have been successful[.] Has the organization succeeded in its mission? … All these PhDs over there, I don’t know what they do,’” the piece concludes.