Fed chief Ben Bernanke sent out feelers to Capitol Hill last week on whether the central bank can issue its own debt, without mentioning it himself during testimony.

While Big Ben remained publicly mum on the issue, San Francisco Fed President Janet Yellen stated that she thought it would be a way for Bernanke and the governors to reduce capital reserves without shrinking its balance sheet.

New York Fed President William Dudley said last week that under such a program, Fed debt would probably be restricted to maturities of less than 30 days. “We’d like Congress to consider it,” Dudley said. “It’s nice to have — as opposed to critical,” he added.

The major concern for Bernanke is autonomy. There are many who believe the Fed needs much more Congressional oversight and the central bank does not wish to request a bill granting it authority to issue debt –– like Britain, Japan or China –– because other measures will be added diminishing the central bank’s independence.

House resolution 1207 was introduce by Rep. Ron Paul (R-TX), with 190 co-sponsors. The abstract states: To amend title 31, United States Code, to reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported, and for other purposes.

In reality the bill wishes to lift the veil of the private banking system of which the Federal Reserve is bank one. As I’ve said many times Federal Reserve and Federal Express have the same governmental authority.

Since the bill was referred to the House Financial Services Committee chaired by Barney Frank (D-MA) it has been watered down. The bill will now only allow oversight of specific actions taken by the Fed when dealing with company bailouts. So its actions with AIG and Citibank are open to scrutiny, but its broader market specific actions will be left in the shadows, such as its interventions in the money markets days after Lehman Bros.

It’s unfortunate that our Democratic lawmakers could not take a page from President OBama’s chief of staff Rahm Emanuel’s playbook: Never let a crisis pass go to waste.

This is the moment when real monetary change could happen, where the basic tenets of the Founding Fathers could be brought back. Where financial responsibility can be reigned in to our elected officials and not the shadow banking system we currently have.

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