This is the Cato Daily Podcast for Wednesday, July 25th, 2012. I'm Caleb Brown.

The Federal Reserve has played a central role in the financial crisis and its aftermath.

Congressman Ron Paul has devoted much of his career to the idea

that monetary policy is the great enabler of government excess and that auditing the

Federal Reserve is a step toward a rational monetary policy.

Mark Calabria, director of financial regulation studies at the Cato Institute, offers his thoughts.

Well, I think the importance of auditing the Fed is twofold.

It's transparency of what the Fed is doing, and of course the Dodd-Frank Act had a audit of the

emergency lending programs, and if it wasn't for for that we wouldn't have known who was

lent to and what amounts you weren't known for instance that the Fed lent on equity

and things like that so a you know a lot of money was spent a lot of actions were taken during the crisis

and so I think the American public has a right to know that on a very basic level and for

us to be able to evaluate the Fed's response that's part of it the other part was a more controversial part in terms of Ron Paul's proposal is auditing

the monetary policy function of the Fed.

And I think, and I say this partly is a former Senate staffer, one of the things that GAO does, and of course the audit bill assigns the responsibility to GAO, the government accountability office, is GAO evaluates programs. It makes suggestions to Congress on,

is this program working, is this effective?

And so I'll get and say from my experience

in the banking committee, most senators and congressmen

know very little about monetary policy.

So I think the long-term most important potential of a Fed audit is simply to educate members

of Congress on how monetary policy works so that they can actually perform

their oversight responsibilities in at least a somewhat near capable way, which is missing

...