“This is a way to shake your fist at the big bad Fed, and it’s not a good way.”
That was Barney Frank (D-Massachusetts) on the House floor yesterday, summing up the opposition to Ron Paul’s (R-Texas) “Audit the Fed” bill. After decades of introducing bills to either audit or end the Fed (proposals routinely ignored by both Republican and Democratic majorities over the years), Ron Paul finally got his day in the Congressional sun. Every House Republican save one and almost a majority of House Democrats voted for the bill, easily securing the supermajority necessary to pass Ron Paul’s bill. If the Senate and the president were to follow suit (which they won’t), the GAO would gain access to the Fed’s monetary policy discussions, opening the Fed’s books and doors to the public for review.
Given Republican ire against Ben Bernanke and his Fed, no one was surprised to see Republicans line up nearly lock step in favor of Ron Paul’s audit bill. But it’s harder to account for the 88 Democrats who bucked their party’s leadership and threw in their lot with Ron Paul. The graph below shows the marginal effects of several constituency and member characteristics on Democrats’ likelihood of voting for Ron Paul’s bill.
Three effects stand out. First, Blue Dog Democrat—typically representing conservative districts in Red-leaning states—were forty percent more likely to support the bill than their more liberal colleagues. Second, Democrats who won a close race in 2010 were nearly thirty percent more likely to vote for the bill than their more electorally secure colleagues. Not surprisingly, the Fed’s low public standing encourages endangered Democrats to throw their own punches when Republicans take out their Bernanke punching bag.
Finally, Democrats whose districts are home to one of the twelve Federal Reserve district banks are roughly ten percent less likely than their party colleagues to gang up on the Fed—even after controlling for electoral and constituency effects. Remarkably, by dint of distributing the reserve banks to cities across the country, the framers of the Fed may have hard wired support for the Fed far beyond Wall Street. Even on a bill that has no legislative legs, these reserve bank Democrats had second thoughts about siding with the Fed’s critics. Granted, the effect today is confined to Democrats, and at ten percent is relatively small. But it’s good news for an institution in dire need of any political support it can get.