Ron Paul’s Statement on the Passage of the Bailout Bill

United States House of Representatives
Statement on HR 1424
October 3, 2008
Ron Paul

Madame Speaker, only in Washington could a bill demonstrably worse than its predecessor be brought back for another vote and actually expect to gain votes. That this bailout was initially defeated was a welcome surprise, but the power-brokers in Washington and on Wall Street could not allow that defeat to be permanent. It was most unfortunate that this monstrosity of a bill, loaded up with even more pork, was able to pass.

The Federal Reserve has already injected hundreds of billions of dollars into US and world credit markets. The adjusted monetary base is up sharply, bank reserves have exploded, and the national debt is up almost half a trillion dollars over the past two weeks. Yet, we are still told that after all this intervention, all this inflation, that we still need an additional $700 billion bailout, otherwise the credit markets will seize and the economy will collapse. This is the same excuse that preceded previous bailouts, and undoubtedly we will hear it again in the future after this bailout fails.

One of the most dangerous effects of this bailout is the incredibly elevated risk of moral hazard in the future. The worst performing financial services firms, even those who have been taken over by the government or have filed for bankruptcy, will find all of their poor decision-making rewarded. What incentive do Wall Street firms or any other large concerns have to make sound financial decisions, now that they see the federal government bailing out private companies to the tune of trillions of dollars? As Congress did with the legislation authorizing the Fannie and Freddie bailout, it proposes a solution that exacerbates and encourages the problematic behavior that led to this crisis in the first place.

With deposit insurance increasing to $250,000 and banks able to set their reserves to zero, we will undoubtedly see future increases in unsound lending. No one in our society seems to understand that wealth is not created by government fiat, is not created by banks, and is not created through the manipulation of interest rates and provision of easy credit. A debt-based society cannot prosper and is doomed to fail, as debts must either be defaulted on or repaid, neither resolution of which presents this country with a pleasant view of the future. True wealth can only come about through savings, the deferral of present consumption in order to provide for a higher level of future consumption. Instead, our government through its own behavior and through its policies encourages us to live beyond our means, reducing existing capital and mortgaging our future to pay for present consumption.

The money for this bailout does not just materialize out of thin air. The entire burden will be borne by the taxpayers, not now, because that is politically unacceptable, but in the future. This bailout will be paid for through the issuance of debt which we can only hope will be purchased by foreign creditors. The interest payments on that debt, which already take up a sizeable portion of federal expenditures, will rise, and our children and grandchildren will be burdened with increased taxes in order to pay that increased debt.

As usual, Congress has show itself to be reactive rather than proactive. For years, many people have been warning about the housing bubble and the inevitable bust. Congress ignored the impending storm, and responded to this crisis with a poorly thought-out piece of legislation that will only further harm the economy. We ought to be ashamed.

(emphasis added)


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  • Meetra

    I too was so saddened and depressed when this bill was passed. Already my father cannot find work, he is a brilliant engineer and there is no place for him in this country right now. I am a senior in college; I will have only one semester of school left after this one ends and I will not be able to finish. This is just wrong. I already do not qualify to even fill out the FAFSA for financial aid, and now this. I feel so personally betrayed by my own country. I curse the day Bill Clinton and his bitch wife were born as most of this started with their deregulation bill passed in 1999. I cannot believe how stupid people are not to have listened to Ron Paul in the first place. The one man that even cares about this country and no one pays attention. Congress should have created a grant program for these companies, it would entail a compact as to their dealings and would hold them from being so irresponsible with the American people and their money. If they violate the compact, the government seizes their company and sells off the pieces. These companies do not deserve the bailout. These executives deserve to be tried for treason and executed in my personal opinion. They are the real terrorists, the real enemy.

  • Seth

    Maybe as a last resort, I’ll agree to that. Wait a minute.. the Govt. can take away our land. We would have to get our own army and navy if we were to defend it.

  • John Miner

    Maybe we can buy some land from the government and start our own country!

    Who’s in?

  • Seth

    America has voluntary slave labor camps.

  • There is still a constitutional, though admittedly statistically small possibility of Ron Paul getting into the presidency. If the clueless in charge are unable to maintain the economy (by pumping in trillions $) until one of the chosen stuffed-shirts is picked at the convention, the delegates (Democratic or Republican) may wise-up and vote in Ron Paul, who is the only candidate that understands and communicates what he understands is happening in the financial markets. It would be a small blow to “democracy” in America, but it would be within the legal framework- the choice by delegates as last step was purposefully mandated by the constitution for cases just like this (i.e., people come to realize they are about to elect someone that HAS NO CLUE as to what is going on in a time of dire need).

    I would give it 1:1000 of happening, but hey it is possible. If a couple more trillion $’s keep the game going until January, then the sheeple will get the stuffed-shirts.

    Ron Paul needs to keep up his campaigning right up to the day of the convention. Everyone needs to contact delegates and make them realize they have this power.

  • Jorge Lopez

    I will encourage everyone to WRITE IN RON PAUL’s name in the Ballot this Nov 4th. Ron: I am voting for you man.

  • Michael Pederen

    Supprise, suprise. The Dow is down more then 500 points to its lowest point in the last four years. The “bailout” didn’t even keep the market propted up for 1 week. Glad my kids signed up for all this debt just by being born.

    I too am writing in Ron Paul this November, I can’t support any canidate who will sell out our future and our kids futures. I will not longer vote for David Drier as he sold me out also.



    Dr Paul,
    I am very interested in freeing us from a debt ridden economy Recently I have found out about the hoax perpetrated by the Federal Reserve and the dangers of a central bank that is not run by our treasury department. I am interested in abolishing the Federal reserve. Can you help me begin a grassroots awareness of the Federal reserve. Once people are made aware of the banking policies of this country I am sure they will be on board with abolishing the Federal reserve. I live in Buffalo New York.

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  • Spencer

    Paulson and friends should go to jail.

    Snippet from this article–

    “Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.

    On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.

    They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.

    The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary.

    A lone dissenter — a software consultant and expert on risk management — weighed in from Indiana with a two-page letter to warn the commission that the move was a grave mistake. He never heard back from Washington.”

  • Michi Samad

    When a similar financial crisis happened in Japan in the late ’90s, there was a sense of shame and dishonor and these real estate tycoons & banking CEOs did apologize to the country. In addition, the corporate executives voluntarily gave-up their salaries and retirement packages to the bailout, although there have never been “Golden Parachute” or “the sky’s the limit” executives’ salaries like America to begin with.

    I think that the American taxpayer would like to see those who brought this country to this point, “voluntarily” GIVE the previous, or coming, year’s income to the bailout. We could start with WaMu’s Mr. Fishman, who got $19 million for three weeks’ work. I overheard that AIG’s new CEO’s salary is 900K a month. Is that true? Or 90K? After the American taxpayer did a big favor for them, this would be a great opportunity for them to “Do the Right Thing”.

  • It amazes me how few of my peers at school even know where the money the government spends comes from. It’s not my fault, I voted Ron Paul!

  • H. Craig Bradley

    Although this bailout and the encouragement of additional moral hazards in the future won’t immediately be charged to today’s taxpayers, it could still affect most Americans of this generation. Our financial system has become less stable and reliable. Therefore, financial risks will remain higher than they otherwise would be. Consequently, people will likely loose money in the here and now.

    In addition, we should expect the possibility of a lower or stagnant standard of living, as the funds to increase it may not be available for most consumers in the future.

    For example, I expect we will suffer reductions in our future investment income and the value of our dollar through higher inflation. Jobs may remain difficult to find and secure, and wage growth suppressed, as well. Perhaps we must get used to having a disruptive financial scare every 10 years or so, as residents of Florida and the Gulf Coast periodically must cope with Class II & IV Hurricanes such as Katrina or Ike.

    We had real bad recessions in 1980, 1990, 2001, and now, 2008. It seems like the financial hurricanes are more random and arriving more often lately.

  • Josh

    Dr. Paul, in my heart, I hope your dire predictions turn out to be wrong. But in my head, I know them to be right. God help America in this time of folly.

  • PoorHouse

    Well said, Ronnie, well said…

    I’m still writing you in this November.

    One of these days Washington will wake up to a revolt, but not until then will things ever change. I feel America is so uneducated in current times, stripped by the government over the years, that the people just won’t “get it” until things are so bad that they actually storm the steps. Sad, sad, sad. Our forefathers would be so ashamed.

  • I took the majority of this day to mourn the personal injury I and my country has taken. Then comes the anger; the anger that motivates to action.

    I had a conversation just this past Thursday, where we were discussing the economy. “What a great time to be alive,” I mentioned to my friend. And she agreed. She had stated that she always had a passion for the 1960’s, an era of great change – yet she had been raised in the decades that followed. We discussed the heartache and discomfort that the 60’s must have brought about; that which looks attractive when looking back isn’t always joyous when going through them.

    Such is our situation. For many, these current events are very uncomfortable – and I’m no stranger to the financial hits and heartaches of the year past. But the opportunity for growth we have in front of us is fantastic. See, Americans are great, resilient, passionate individuals. While it seems when we’re comfortable, we’re quite passive and our memories are short; but when somebody pushes our buttons we stand up and fight for principle, for what we feel is right.

    Well, our buttons are being pushed right now. Government elitists are leaving the fingerprints of tyranny on more and more of the laws they enact. This country is not a democracy, but a republic. A democracy says, “majority rules.” But our Founding Fathers knew that once any unscrupulous majority figured out that they could take from the producers to give to themselves, the democracy is ruined. So a republic was born, where we have a system of individuals who represent the individuals, but are sworn first to uphold the Constitution and that which is true and correct. So that a simple majority didn’t win out, but a standard of law had to also be considered.

    The challenge is this: Laws have been altered over time that allows a similar tragedy of a failed democracy. The republic has been twisted to give precedence to, not the simple majority, but to those who understand the ‘system’, to those who are either inside the ‘system’ or are “in bed” with somebody inside the ‘system’. Those who represent the majority have become both the pawns and the kings, and if they don’t play along, they’re considered the court jesters (no offense, Rep. Paul).

    The solution? People who give a damn. And people don’t give a damn, as a majority, when they’re comfortable. The social comptrollers know this, and have strove for keeping the majority comfortable – and at this time at the expense of the nation. There are several problems the political leaches face right now: First, their victims are no longer comfortable. Now, this is okay (for the elitist) as long as there is fear involved; when people fear they cling to a solution of a sharp dressed guy/gal who simply makes unsubstantiated promises. And that leads us to the next challenge of the leach: The “people” are moving quickly past their fear and into disappointment and hurt over a betrayal of their voices not being heard by their representatives. Hurt moves quickly into anger. Anger – and I’m not talking about violent anger, I’m talking about moving resolve – anger leads to action.

    Action is frustration when we, as individuals, don’t know what to do. But with a plan of simplicity, a clear cut goal, we can even differ on efficacy, but move forward we will.

    The great news is that the Founding Fathers have already laid out a great path for us to follow (not to get back to, there’s no going backwards; but to move forward with). The great news is that, to paraphrase and borrow Joseph Ellis’ words, is that the principles of a prosperous nation do not need to be discovered or invented, only applied.

    What we need is anything but a top-down change. We need a grass-roots, peace-filled revolution. This can be accomplished quite easily in under a short decade, in a fashion that casts NO ONE out of the process, except for elitist career politicians. That answer is found in Thomas Jefferson’s outline of a Ward System.

    Well… I’ve written enough here. Inspired by my passion, this short message became a proclamation. The bottom line is that we can take pride in our country, in our freedoms, in our own individual strengths, talents and abilities. Thank you, Ron Paul, for your insights on making Economics the simple science that it can be, and sharing these with the world. That’s what I’m talking about: Each American taking what he or she has to offer, and combining our individuality for a great strength where every voice is heard and counted. You’ll hear more from me, and I hope to hear more from each American.