Barney: Fed audit bill will pass in October

House Financial Services Chairman Barney Frank (D-Mass.) says he's negotiating with Rep. Ron Paul (R-Tx.) to create mandatory audits of the Federal Reserve -- and that some kind of audit bill will pass the House in October as part of a bigger financial overhaul package.

Frank, who supports Ben Bernanke's re-appointment as Fed chairman, is walking a tightrope between supporting the administration and heeding the broad, bipartisan support for the Fed audit bill, which has 282 co-sponsors.

After initially backing the Fed's role as a dominant "systemic regulator," he now seems leerier of its institutional reach -- and wants to curtail the Fed's nearly unlimited powers to lend cash -- citing the $80-plus billion loan to AIG.

[Video]

"I have been pushing for more openness in the Fed," Frank told a town hall meeting in Massachusetts earlier this month. "They will be the major losers of power if I am successful... We are going to curtial [their] lending power."

On Paul's bill:

"We will subject them to a complete audit," Frank said. "I've been working with Ron Paul, whose the main sponsor of that bill. We don't want to have the audit appear as if it is influencing monetary policy because that would be inflationary and Ron Paul and i agree on it...One of the things the audit will tell us is what the Fed buys and sells -- but not instantly."

He added: "We will probably have that data released after a time period of several months -- enough time so that would not be market-sensitive. That will be part of the over federal regulations we are adopting.. The House will pass it probably in October."

The Senate, incidentally, has shown little enthusiasm for the Paul bill -- but that could change of its passage lights a populist bonfire.

Glenn Thrush is senior staff writer at Politico Magazine.