The Federal Reserve apparently can't account for $9 trillion in off-balance sheet transactions. Experts are now saying that in excess of $12 trillion dollar has gone missing over the past year as the nation plummeted into recession.

When Rep. Alan Grayson (D-Orlando) asked Inspector General Elizabeth Coleman of the Federal Reserve some very basic questions about where the trillions of dollars that have come from the Fed's expanded balance sheet, the IG didn't know.

Worse, nobody at the Fed seems to have any idea what the losses on its $2 trillion portfolio really are.

"I am shocked to find out that nobody at the Federal Reserve is keeping track of anything," Grayson says.

Grayson asked Coleman if her agency had done any research into the decision not to save Lehman Brothers, which “sent shockwaves through the entire financial system,” Coleman said it had not.

Photo: Senator Ron Paul

“What about the $1 trillion plus expansion of the Federal reserve’s balance sheet since last September?” Grayson asked.

“We have different connotations,”  Coleman replied. “We’re actually conducting a fairly high-level review of the various lending facilities collectively.”

Translation: Nobody at the Fed knows where the money went.

Do you know what who got the $1 trillion or more in the Fed's expansion of its balance, Grayson pressed.

"I do not know. We have not looked at this specific area at the particular point on that specific review," Coleman answer.

What about the trillions of off-balance transactions since last September, Grayson asked.

Coleman demurred again, saying the IG does not have jurisdiction to audit the Federal Reserve.

Grayson pointed out that it was the inspector general's job to audit such spending and asked again if the office had done any investigation at all.

Coleman's answer: Not enough yet to even respond. "We are in not a position to say if there losses."

Grayson concluded, "I am shocked to find out that nobody at the Federal Reserve, including the inspector general, is keeping track of this."

Meanwhile, Federal Reserve Chairman Ben Bernanke says the bank is working on ways to rein in the massive balance sheet commitments.

"A majority of the members who made these projections just recently took 2 percent as being an appropriate number" for inflation, Bernanke said Monday.

"Somewhere between 1-1/2 to 2 percent is basically the number that our committee has individually stated is the appropriate medium-term inflation rate.

"To achieve that we need to demonstrate that we will be able to exit from the balance sheet position that we currently have, and have been working on this intensively," Bernanke said in response to questions after a speech to a conference organized by the Federal Reserve Bank of Atlanta, reported by Reuters.

The Federal Reserve apparently can't account for $9 trillion in off-balance sheet transactions.

When Rep. Alan Grayson (D-Orlando) asked Inspector General Elizabeth Coleman of the Federal Reserve some very basic questions about where the trillions of dollars that have come from the Fed's expanded balance sheet, the IG didn't know.

Worse, nobody at the Fed seems to have any idea what the losses on its $2 trillion portfolio really are.

"I am shocked to find out that nobody at the Federal Reserve is keeping track of anything," Grayson says.

Grayson asked Coleman if her agency had done any research into the decision not to save Lehman Brothers, which “sent shockwaves through the entire financial system,” Coleman said it had not.

“What about the $1 trillion plus expansion of the Federal reserve’s balance sheet since last September?” Grayson asked.

“We have different connotations,” Coleman replied. “We’re actually conducting a fairly high-level review of the various lending facilities collectively.”

Translation: Nobody at the Fed knows where the money went.

Do you know what who got the $1 trillion or more in the Fed's expansion of its balance, Grayson pressed.

"I do not know. We have not looked at this specific area at the particular point on that specific review," Coleman answer.

What about the trillions of off-balance transactions since last September, Grayson asked.

Coleman demurred again, saying the IG does not have jurisdiction to audit the Federal Reserve.

Grayson pointed out that it was the inspector general's job to audit such spending and asked again if the office had done any investigation at all.

Coleman's answer: Not enough yet to even respond. "We are in not a position to say if there losses."

Grayson concluded, "I am shocked to find out that nobody at the Federal Reserve, including the inspector general, is keeping track of this."

Meanwhile, Federal Reserve Chairman Ben Bernanke says the bank is working on ways to rein in the massive balance sheet commitments.

"A majority of the members who made these projections just recently took 2 percent as being an appropriate number" for inflation, Bernanke said Monday.

"Somewhere between 1-1/2 to 2 percent is basically the number that our committee has individually stated is the appropriate medium-term inflation rate.

"To achieve that we need to demonstrate that we will be able to exit from the balance sheet position that we currently have, and have been working on this intensively," Bernanke said in response to questions after a speech to a conference organized by the Federal Reserve Bank of Atlanta, reported by Reuters.

U.S. Rep. Ron Paul, R-Texas, long has opposed the power held by the Federal Reserve and its ability to manipulate the nation's economy and over the years has launched proposals to get rid of the quasi-governmental agency, without significant support.

But his current plan, H.R. 1207, the Federal Reserve Transparency Act of 2009 to demand an audit of the organization, is quickly gaining steam.

As of today, the proposal had collected a bipartisan coalition of 179 members of Congress who have signed on as co-sponsors.

Not that Paul's ultimate goals have changed significantly.

"To understand how unwise it is to have the Federal Reserve, one must first understand the magnitude of the privileges they have," he wrote in a new Straight Talk commentary. "They have been given the power to create money, by the trillions, and to give it to their friends, under any terms they wish, with little or no meaningful oversight or accountability."

He's even said Congress should "reassert its constitutional authority over monetary policy."

Besides the support in the U.S. House, a companion bill, S. 604, also now has been introduced in the U.S. Senate by Sen. Bernard Sanders of Vermont. It has been referred to the Senate Committee on Banking, Housing and Urban Affairs.

Paul said that should help the effort "begin to gain momentum."

A spokeswoman in Paul's congressional office also told WND that Rep. Barney Frank, the chief of the financial services committee in the House, already has expressed a willingness to hold hearings on the issue.

When Paul introduced his latest proposal to audit the organization there were 11 co-sponsors, which grew quickly to 124 just a few weeks ago.

The bill calls for the comptroller general of the United States to audit the private Federal Reserve and report to Congress before the end of 2010.

The Constitution, Paul said, gives Congress, not the private Federal Reserve, "the authority to coin money and regulate the value of the currency."

Paul explained his advocacy for the H.R. 1207 audit in the U.S. House:

"Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar," the Texas Republican said. "Since 1913 the dollar has lost over 95 percent of its purchasing power, aided and abetted by the Federal Reserve's loose monetary policy.

"How long will we as a Congress stand idly by while hard-working Americans see their savings eaten away by inflation? Only big-spending politicians and politically favored bankers benefit from inflation," he said.

Paul called oversight of the Fed "long overdue."

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"Since its inception, the Federal Reserve has always operated in the shadows, without sufficient scrutiny or oversight of its operations," he continued.

"The Federal Reserve can enter into agreements with foreign central banks and foreign governments, and the GAO is prohibited from auditing or even seeing these agreements. Why should a government – established agency, whose police force has federal law enforcement powers, and whose notes have legal tender status in this country, be allowed to enter into agreements with foreign powers and foreign banking institutions with no oversight?"

Paul's bill would also make the Federal Reserve's funding facilities, including the Primary Dealer Credit Facility, Term Securities Lending Facility, and Term Asset-Backed Securities Lending Facility subject to congressional oversight.

His new commentary was titled, "Audit the Fed, Then End It!"

It cited some "pushback" from individuals in Congress.

"The main argument seems to be that Congressional oversight over the Fed is government interference in the free market," he wrote. "This argument shows a misunderstanding of what a free market really is. Fundamentally, you cannot defend the Federal Reserve and the free market at the same time.

"The Fed negates the very foundation of a free market by artificially manipulating the price and supply of money – the lifeblood of the economy. In a free market, interest rates, like the price of any other consumer good, are decentralized and set by the market. The only legitimate, Constitutional role of government in monetary policy is to protect the integrity of the monetary unit and defend against counterfeiters," he said.

What has actually happened is the U.S. is that Congress "has abdicated this responsibility to a cabal of elite, quasi-governmental banks who, instead of stabilizing the economy, have destabilized it," he wrote.

Paul said it took "less than two decades for the Federal Reserve to bring on the Great Depression of the 1930s."

He also said some have been worried about bringing the Fed into the "political process."

"The Federal Reserve is already heavily entrenched in the political process, as the Fed chairman is a political appointee. High level officials routinely make the rounds between positions at the Fed, member banks, Treasury and back again, taking care of friends and each other along the way," he said.

Note: Concerned individuals may contact members of the House Committee of Financial Services in reference to H.R. 1207 and the Senate Banking, Housing, and Urban Affairs committee in reference to its companion bill, S. 604. They may also contact their respective representatives and senators.