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The 'audit the Fed' movement is taking a big step forward in Congress this week

An effort to conduct an unconventional audit of the Federal Reserve is gaining traction in Washington and on its way to a potentially important milestone this week.

The Federal Reserve Transparency Act will undergo the markup process this week in the House Oversight and Government Reform Committee. A product of the "Audit the Fed" movement, the bill seeks not a financial exam of the U.S. central bank but rather a peek behind the curtain of how monetary decision-making happens. The markup comes after several failed efforts to move the legislation ahead, and supporters believe there now is enough backing in Congress to go forward.

The Fed's policymaking arm, the Federal Open Market Committee, does not meet in public and only communicates its decisions through carefully worded statements at the end of its meetings and through officials' remarks at speaking engagements and through the press.

Former U.S. Rep. Ron Paul of Texas has been the leading voice behind the Fed auditing effort; his son, Kentucky Republican Sen. Rand Paul, has been spearheading the bill in Congress. The Campaign for Liberty, which Ron Paul chairs, believes this week's legislative effort marks a significant step.

"Given the tenor of what people seem to be signaling from the campaign trail in both parties, it's not necessarily seen as a good year to be siding with the Federal Reserve, the big banks and international financial institutions against the majority of Americans," Norman Singleton, president of the Campaign for Liberty, said in an interview. "The best possible outcome is for a more fully informed public about Fed monetary policy."

Scrutiny into the Fed's practices comes as monetary policy has played a central role in the economy and financial markets since the days of the financial crisis.

The U.S. central bank kept its interest rate target near zero for seven years before hiking a quarter point in December 2015. Also, the Fed conducted three rounds of bond purchases known as quantitative easing that ballooned the bank's balance sheet to more than $4.5 trillion.

Stocks moved almost in tandem with the Fed's QE operations, overall gaining more than 200 percent since the crisis lows in March 2009 but almost always falling during lulls in the program. The S&P 500 index is up only about 3 percent since the Fed ended the third QE round in late October 2014.

Fed critics believe the process of how and why the central bank made its decisions should be more transparent.

"While the Fed has taken the position that we're already audited, the fact is that audit is a financial audit and just provides the figures. It doesn't really give you a full glimpse of the Fed's conduct of monetary policy," Singleton said.

Indeed, the Fed undergoes a variety of checks. The Government Accountability Office and the Fed's Office of Inspector General conduct multiple exams of Fed business, its financial statements are scrutinized by an independent auditor, and the Fed posts its balance sheet online.

However, critics are demanding more.

"The meetings of the Fed, talking about monetary policy, is just the tip of the iceberg about the unprecedented autonomy and capacity that the Fed wields," said Larry Jacobs, a University of Minnesota professor of political science and co-author of the book "Fed Power: How Finance Wins." "There's no other domestic institution that enjoys that kind of power."

Opponents of the "audit the Fed" movement believe the ultimate consequence will be to remove the Fed's policy independence from political pressure. They believe that independence is necessary for a group that needs to be able to make decisions "reasonably and in the national interest," in the words of former Chairman Ben Bernanke.

"The Fed should continue to strive to improve its transparency and accountability, and in particular to ensure that Congress has all the information it needs to fulfill its oversight responsibilities," Bernanke wrote in a blog post earlier this year. "However, this goal is not best achieved by overturning longstanding practice and effectively inserting Congress and the GAO into monetary policy decisions, calling into question the Fed's independence."

However, the political winds do seem to be blowing against the Fed on this matter.

Presumptive Republican presidential nominee Donald Trump has voiced support for the bill and Democratic challenger Bernie Sanders, a senator from Vermont, voted for the legislation in January. Even Democratic front-runner Hillary Clinton has supported shaking up the central bank.

"It's the Fed and the Fed alone that's a radical example of independence and power. The question being raised in the presidential campaign is, 'is this too much and is this the time to look at scaling back the Fed's powers?'" Jacobs said. "There should be a serious vote on audit the Fed. I think it's a reasonable proposal."