You had to see this coming. The U.S. Federal Reserve is now being subjected to cries for transparency that it has said are necessary for the financial institutions it regulates. The campaign is being spearheaded by Florida Democratic Congressman Alan Grayson. Believe it or not, no one currently audits the Federal Reserve's accounts. And some skeptics have come to think that the Federal Reserve's fiscal house is not in order and that the Fed has actually not been able to balance its books and account for all the assets it has purchased. Zero Hedge claims the Fed cannot account for nearly $9 trillion in off-balance sheet transactions.

Everybody's talking about the need for changes in the U.S. financial regulatory system. This week the U.S. GAO released its framework for crafting and assessing modernization proposals. First the report highlights the major problems with our current system:

• Regulators have often failed to mitigate systemic risks posed by large and interconnected financial conglomerates and to ensure they adequately manage their risks.
• Regulators have had problems addressing financial market problems resulting from activities of less regulated markets -- non-bank mortgage lenders, hedge funds, and credit rating agencies.
• New and complex investment products have not been adequately monitored or even understood.
• Standards set by accounting and financial regulators have not kept up with financial market developments.
• Attempts to coordinate internationally with other regulators have been difficult because of the fragmented U.S. regulatory structure.

Actually it's this fragmented structure that is at the root of all our problems. Today, we have almost a dozen federal banking, securities, futures and other regulatory agencies. The Federal Reserve System was created in 1913 and most of the remaining agencies were created in response to the Great Depression. Now that we seem to be nearing that same type of financial devastation, we need to reconsider that entire regulatory structure.

Auditors from the General Accounting Office say that no one is keeping particularly good tabs on how Paulson is using the $700 billion bailout fund. According to The New York Times, "Government auditors urged the Treasury Department on Tuesday to act more quickly to develop the internal controls and hire the professional staff necessary to ensure that its $700 billion financial rescue package is operating effectively and ethically."

That won't happen. Treasury is too busy putting out fires, which range from getting money into the large banks to considering whether to fund a rescue plan for mortgage owners. Paulson has less than two months to leave his mark on the economy and then he is "retired." Treasury barely has enough qualified people to figure out where money should go, let alone keep careful track of it.

The complaint by auditors is fair, but it gets to the heart of most large federal government spending packages, whether they are for the Defense Department or new national health initiatives. These programs are just too large to monitor completely, so the taxpayers have to rely on the competence of the officials who spend the money in the first place.

Paulson is faced with using his personnel on saving the financial system or counting beans. He has, appropriately, put his effort into the more pressing problem.

Douglas A. McIntyre is an editor at 247wallst.com.