The U.S. House of Representatives voted overwhelmingly on Wednesday for a piece of legislation Rep. Ron Paul (R-TX) has been pushing for more than a decade, calling for the Government Accountability Office (GAO) to audit the nation’s central bank, despite the Federal Reserve chairman’s warning that such action could produce a “nightmare scenario.”

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Members of the House passed Paul’s “Audit the Fed” bill by a vote of 327-98. Only one Republican voted against the bill: Rep. Bob Turner of New York. In all, 89 Democrats joined Republicans in passing the bill, including arguably the chamber’s most liberal member, outgoing Rep. Dennis Kucinich (D-OH), who cited recent reporting by The Washington Post that claims the New York Federal Reserve knew but did not tell regulators about manipulation a key inter-bank lending rate known as Libor.

“The Fed creates trillions of dollars out of nothing and gives it to banks, Congress is in the dark,” he yelled in support of the bill. “The Fed sets the stage for the subprime meltdown, Congress is in the dark. The Fed takes a dive on Libor, Congress is in the dark. The Fed doesn’t tell regulators what is going on, Congress is in the dark.”

While the victory will likely be seen as one of Paul’s crowning achievements in Congress, it will progress no further this session thanks to Senate Majority Leader Harry Reid (D-NV), who has refused to bring it up.

Paul is set to retire at the end of this session, following his third failed run for the presidency. And while his son, Sen. Rand Paul (R-KY) has backed presumptive Republican presidential nominee Mitt Romney, the elder Paul has refused.

The Texas stalwart and longtime foe of central bankers supported a Fed audit in 2010 that became part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. That audit required the Fed to disclose its lending practices during the 2008 financial crisis, revealing that the bank doled out more than $16 trillion in loans and assets swaps to financial institutions all over the world in an effort to stabilize global markets.

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But the audit did not satisfy Paul, who saw it as a stripped-down version of his original proposal because it did not examine Fed monetary policy negotiations as well. If Wednesday’s vote is any measure, it appears now that most of Paul’s House colleagues agree with him, and that’s got Fed Chairman Ben Bernanke seeing “nightmare scenarios.”

Speaking last week to the House Financial Services Committee, which is chaired by Paul, Bernanke warned that any effort by Congress to compromise the independence of the Fed would weaken its ability to stabilize the economy in the event of a crisis like the near-collapse of 2008.

“The nightmare scenario that I have is one in which some future Fed chairman would decide to say, raise the federal funds rate by 25 basis points, and somebody in this room would say, ‘I don’t like this decision and I want the [Government Accountability Office] to go in… and give us an independent opinion of whether or not that would be the right decision,'” he said.

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Photo: Flickr user Gage Skidmore, creative commons licensed.