http://www.youtube.com/watch?v=AXJb-JkysEQ
Event: Financial Regulation Hearing – House Financial Services Committee
Channel: C-SPAN3
Date: 3/26/2009
Transcript:
Barney Frank: The gentleman from Texas.
Ron Paul: Thank you, Mr. Chairman. The Chairman in his opening statement talked about the problem being excessive leverage and I certainly agree with that and others refer to that as pure emitting of debt, and then we ran into trouble and we come with the idea that regulations will solve this without asking the question, “Where did all this leveraging come from and how much of it was related to easy money from the Federal Reserve and artificially low interest rates.”
So I’m very skeptical of regulations per se because I don’t think that solves the problem, and of course, everybody knows I’m a proponent of the free market and this is certainly not free markets that had got us into trouble and this certainly won’t solve it.
But, you know, in other areas we never automatically resort to regulations. When it comes to the press, if we had regulations on the press, we would call it prior restraint and we would be outraged.
If we wanted to regulate personal behavior, we would be outraged and call this legislating morality. But when it comes to economics, it seems like we have been conditioned to say, “Oh, that is okay because that’s good economic policy.”
I accept it on the first two, but not in the third and therefore I challenge the whole system and it hasn’t been that way forever. It’s really been that way since the 1930s, about 75 years, that we in the Congress have deferred to the Executive Branch to write regulations, which are essentially laws. And yet the Constitution is very clear, all legislative power shall be vested in the Congress.
So we write laws and we transfer this power, so essentially we’ve done this for years. We have reneged on our responsibility. We have not met our prerogatives and therefore we participate in this.
But in your position, you’ve been trained throughout your life to be a regulator and that is something I know you can’t deal with, but there is one area that I think you might be able to shed some light on and work toward the rule of law.
Because, you know, traditionally, under common law, and our system has always assumed that we’re innocent until proven guilty, and yet when it comes to regulations, first we allow the Executive Branch to legislate as well as the court, but in the administrative courts, we’re assumed to be guilty until proven innocent.
You’re in charge of the IRS. The IRS does this. So this is some place where if there were a reasonable respect for the rule of law, then we can change that tone and assume that the taxpayer or the person that is on the receiving end of these regulations say, “Hey, at least, now is the burden of proof is on the government to prove that somebody broke these regulations”, and yet look at what we’re doing endlessly, and yet I see that as the real culprit in all this because we’re assuming the citizen is guilty.
Could you comment on that and tell me what might be able to do in changing the direction.
Tim Geithner: That was a very thoughtful set of questions. I would just want to correct one thing. I’ve never been a regulator, for better or worse. And I think you’re right to say that we have to be very skeptical that regulations can solve all of these problems.
We have postured our system, which are overwhelmed by regulations. Overwhelmed by regulations. It wasn’t the absence of regulations that was the problem, it was despite the presence of regulations, and you have huge risk built up.
But in banks, because banks by definition, take on leverage, transform short-term liability into long-term assets for the good of the system as a whole, they are vulnerable to runs. Because they’re vulnerable to runs, governments around the world have been put in place insurance protections to protect the inside risks.
Because of the existence of those protections, you have to impose standards on them on leverage to protect against the moral hazard created by the insurance. That is a good economic case for regulation –
Ron Paul: Excuse me. Excuse me. But I only have a couple of seconds left. But see if you can address the subject of giving more respect to that individual who is accused of a crime, can’t we assume that the government has the burden of proof?
Tim Geithner: You’re talking in a criminal context?
Ron Paul: Well, any way. I mean any time a regulator comes in and says that you’re guilty of something, why doesn’t the government have to prove he’s guilty, why can’t we assume –
Tim Geithner: Guilty of a criminal violation or of anything?
Ron Paul: Civil or criminal. Why not? I mean that’s a principal that has been around for more than a thousand years, at least 800 years.
Tim Geithner: I’m neither a regulator nor a lawyer, unfortunately. So I’m not sure I can give you adequate answers to that, but I’d be happy to think about it a little bit and get back to you with a view on –
Ron Paul: Well, I don’t think it’s complicated to think about the principle of innocent until proven guilty. How about the IRS? Can’t you advise the IRS and say, “don’t assume anything until you prove these guys did something wrong before we prosecute them and say that they owe $500,000.” I mean –
Tim Geithner: Well, Mr. Chairman, again, if this is about the IRS, I’d be happy to come talk to you about that and try to –
Barney Frank: The gentleman’s time has expired. The gentleman from Pennsylvania, the chairman of the sub-committee.
- Ron Paul at the Financial Services Committee Hearing Date: 11/4/2009 Venue: Financial Services Committee Hearing Transcript: Ron Paul: I thank you, Mr....
- Ron Paul Questions Timothy Geithner Venue: House Financial Services Committee Topic: Systemic Regulation, Prudential Matters, Resolution Authority and Securitization...
- End The Fed & Consider Outlawing Fractional Reserve Banking Channel: CNBC Show: Squawk Box Date: 11/13/2009 Joe Kernen: But Chris Dodd has a...
The problem the audit will show is that there is a disproportionate level between the cash issued and “permitted” money flow, i.e there is a bubble (as if we did not know that).
The problem is one of design since the gold standard has been abolished and replaced by economic theorem leading to the nilly willy creation of money by fractional reserve lending.
If I were to give you security worth $10 and based on that you are entitled to procure $7.50 worth of guarantee by a third party and it turns out that I only had $2.50 to start off with – I would be sharing a cell with “Bubba” for fraud and a number of other state offences.
However the banking system operates on Fractional-reserve banking, this determines the relationship between the amount of central bank money (currency) in the official money supply statistics and the total money supply.
Most of the money in these systems is commercial bank money . Fractional reserve banking involves the issuance and creation of commercial bank money, which increases the money supply through the deposit creation multiplier.
The issue of money through the banking system is a mechanism of monetary transmission, which a central bank can influence indirectly by raising or lowering interest rates (although banking regulations may also be adjusted to influence the money supply, depending on the circumstances).
In January 2007, the amount of central bank money was $750.5 billion while the amount of commercial bank money was $6.33 trillion.
Now look at the graph of supply versus asset as alleged at http://en.wikipedia.org/wiki/Fractional-reserve_banking#Formula .
It is one big circle – The Federal Reserve loans bank A on reserve A then loans to bank B, C and D effectively on the same security.
In my mind all Kudos to Ron Paul – love your work you have global supporters even in Australia, where we wish we had a “Bruce Paul” to do the same thing….
Like or Dislike:
0 
0
The communique from the G-20 was that they were going to work together to make the world a better place for humankind in every imaginable way!!!!!
In other words, reverse everything they have done for the last century!!!!
Glorious new day!
Like or Dislike:
0 
0
The problem of our Western civilization is quite simple and can be resumed with 3 words: LACK OF ACCOUNTABILITY
I we -the people- are not able to punish the prepetrator of crimes and offenses from the simple citizen to the local officer up to the President, we will never have our freedom back.
US constitution is clear, simple and can be understood by my 10 year old kids. Yet University professors can stretch it to non-sense levels and Presidents apply the inhumane results and none has the gutts to hold them accountable. Actually propaganda history makes them heroes.
This is insane, and what makes even less sense is that mankind is repeating this throughout history.
Like or Dislike:
0 
0
Woodrow Wilson after signing the Federal Reserve Act: “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is now controlled by its system of credit.We are no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.”
Like or Dislike:
0 
0
Folks, the Federal Reserve is not Federal unless you consider that it is as Federal as Federal Express.
The Federal Reserve is a private bank, self-regulation didn’t work, wars that the media lied us into to pay off the Fed didn’t work, two more terms of military engagements plus the taxes of the Fed didn’t work and the IRS continued the Federal Reserve’s system.
Today, the Federal Reserve continues to be an entirely private bank unanswerable to anyone. Let me emphasize the word “anyone”, as alot of people are not familiar with the fact that while the Federal Reserve does support or hamstring the appointment / codifying of laws, it does not actually have to answer to the same, by the Congress, as dictated in the Federal Reserve act of 1913.
Its entire operation is therefore, kept secret, beyond the minimal information the Treasury Secretary can give us and beyond what check stubs you see when the GAO formally requests those stubs.
http://www.ronpaul.com
It can be said that very simply, the Federal Reserve has made itself into a fourth branch of Government right underneath every person’s nose.
http://www.campaignforliberty.com
Without oversight or transparency the Federal Reserve can continue to make large mistakes with its Credit Default Swaps, can continue to counterfeit supply & demand, and does not face any audit.
Which leads us to today’s current issue and a viable solution. HR 1207 has been introduced, the Federal Reserve transparency accountability act. This is nothing more than a nationwide official audit. For the first time in a great many years, the Federal Reserve will have to answer all questions to Congress directly and the people for whom which they serve in full.
Support HR 1207 and spread the word to your legislators, so that the American people can get much demanded answers and lift the veil of secrecy where we can see what the Federal Reserve bank is really doing, and therefore, take the most supported actions in response.
Like or Dislike:
0 
0
Obama, US Congress & Economist all are Mystery
It is not Obama who is a complete mystery; entire US Congress barring few like Ron Paul and so called Economist like Bernanke, Greenspan, Geithner etc. from prestigious Universities like Harvard advising them; all have become a big mystery. It is beyond the understanding of sane people like you and me to digest and understand how some one can spend $200.00 when that person is earning only $100.00? The only way it is possible is to steal from others. Although I don’t like economy ignorant John McCain as a politician at all but I have to give him credit for coming up with a simple conclusion, Obama economic plan is a Generational Theft.
Clinton & Bush with Foreign & Domestic Policies tailored for the benefit of Israel only; both encouraged the US Government with the help of Israeli & Pro Israeli bankers to steal from the world and Americans by selling them AAA rated investment grade Paper which they all knew from day one is not even worth as Toilet Paper; so that American Politicians, Big business owners & American-Israeli & Israeli leaders can live in super luxuries.
Obama is perpetuating Clinton-Bush era grand theft to maintain the life style of his masters this time by stealing exclusively from the Americans. Obama with his team of Israeli & Pro Israeli Bankers and quasi criminals in US Congress have already wasted more than $2 trillion of your money and my money to buy back this Toilet Paper from US financial institutions. The final bill to the tax payers will be around $10 trillion. Well it looks like it is Pay Back Time. Obama’s 14 big Financial backers who financed his purchase of $1 billion for the White House are all from the Wall Street! People who say Maddoff ran the largest Ponzy scheme in the world are dead wrong when the History will be written it will be Obama who will get the credit of running the biggest Ponzy scheme with $1 billion financed by white collared criminals to steal $10 trillion from present & next generation of America.
Like or Dislike:
0 
0
Regarding economy-clueless McCain, let us not forget that he had one of the foremost economic advisors in the biz: Phil Gramm. So had McCain been elected, everything would probably have been okay, because with Phil around, who needs to know from economics? Things get puzzling, just ask ol’ Phil.
Re: Israeli bankers, Israel is a place. Zionists are people. Israel is a tool. Zionists are the users. Jews are presumably “a people,” perhaps adherents to a set of religious beliefs, though many are, in fact, not of Semite origin. Zionists are individual people, also not necessarily of Semitic origin. (Palestinians are a better example of Semites, making many Israelis the most virulently anti-semitic people on Earth.)
Of course you are right about the Zionist banker/brokers (you don’t have to be Jewish to be a Zionist, or to be used by a Zionist), they have robbed us blind. Not by accident, they obviously have an agenda. We losers get to play a big part.
I make a distinction between Jewish and Zionist (knowing that most Zionists are Jews, but most Jews are not Zionists). It is indisputable that the major banking houses are mainly Jewish (including the Fed, and certainly those investment houses with Jewish names), but it is also worthy of note that some were fraudulently taken down by the promulgation of rumors followed by illegal (but unregulated) naked short selling, and that what we witnessed was a form of financial cannibalism occurring between major, predominantly Jewish banking houses. Hence Goldman-Sachs gobbles Bear-Stearns, and so on.
Is it such a surprise that so many of Madoff’s victims were Jewish, including Jewish charities?
And on the subject of massive Ponzi schemes, one need look no further than Social Security, a government mandated rip-off on a par with income tax (well, it is, in fact, another income tax, but it is also just another form of “securitization”; it is the government saying: “I will gladly pay you Tuesday, for a hamburger today…”, eating the burger, then moving on to the next generation of wage-slave victims).
Like or Dislike:
0 
0
Good for Ron Paul. He certainly hit the nail on the head. The IRS is particularly presumptious of a taxpayer’s guilt and so is the judicial system. It certainly seems that the defendant bares the burden of proof of innocence. Only in criminal cases such as murder, is this burden squarely on the prosecution, where in order to be found guilty, there cannot be one scintilla of doubt.
Like or Dislike:
0 
0
Perhaps I completely missed this, but who was he worried was guilty until proven innocent?
If he was so worried about the concept of guilty until proven innocent, wouldn’t the same principle apply to his mistrust of the Federal Reserve Board?
I mean, how can one person so consistently, and without even knowing fully how, as an ‘audit has never been completed’, a corporation (like the Fed) works call for it’s ineffectiveness and abolition.
Seems like selective application of logic to me…
Like or Dislike:
0 
0
He’s worried about the creation of a new, all-powerful, overarching banking regulatory agency staffed with people from the likes of Goldman Sachs and Morgan Stanley, taking even greater control over smaller commercial banks (as opposed to just the investment bankers who created this mess when Glass-Steagall was overthrown by Gramm-Leach-Blilely in 1999).
To grant such an agency extraordinary powers over private depositor/lender banks (Mom and Pops) and to force them to comply with rules (such as internal audits and byzantine obligatory reporting, two name just two) designed for far-flung international investment banks, is an unfair burden on those not proven to have been guilty of anything.
As for innocent until proven guilty, the Federal Reserve, like the IRS, was constitutionally illegal from day one. There never was an argument for innocence. The government of the United States cannot, by constitutional law, give control of the money supply away to private individuals unelected by the people of the United States. (Any more than it can legally apply an income tax to private individuals.)
Like or Dislike:
0 
0
Too bad Ron didn’t have a little more time. Geithner’s response about the definition of a bank was right in Ron’s wheelhouse. Oh well, perhaps not the venue.
Like or Dislike:
0 
0
[...] was the problem, it was despite the presence of regulations, and you have huge risk built up.», Tim Geithner, United States Secretary of the Treasury [...]
Like or Dislike:
0 
0
Wow, so I agreed with Ron Paul’s drive towards reconsidering our monetary and banking system, but, as I suspected, he is a pure ideologue because he could do nothing better than parrot Peter Schiff and complaining about fiat money and fiscal irresponsibility. He still gets credit for being a rebel Republican and speaking out about geopolitical “blowback”.
He seems too attached to free markets as a principle that must be adhered to instead of a means towards a desirable ends. I can’t figure out why or how his analogical reasoning between criminal law and corporate law makes sense.
Corporations are not the same as people (except in our fictional legal definition).
1) Corporations have people and processes to deal with regulations.
2) One of the reasons (I believe) we have the principle of “innocent until guilty” is to minimize the risk of punishing someone who is innocent. Banks do not accidentally get fingered in police lineups. If he was going to go by that reasoning, why didn’t he accuse the IRS of planting guns and marijuana when they do audits.
3) Banks have resources to defend themselves adequately and don’t have to rely on public defenders.
4) Punishing a bank is not as bad as throwing a person in jail or executing them.
5) We also have VERY experience that suggests that banks cannot regulate themselves. Selling your misrepresented liabilities to others and using lots of leverage to do so is not as clearly wrong as robbing someone at gunpoint. Therefore, the regulations must be there to delineate what is not acceptable because individual banks bad behavior causes systemic problems when all banks do what’s in their personal interest but harms everyone else. I forget which game theory game this is, but it tends to end badly.
6) It’s not even really a crime from a single actor’s perspective. It’s just bad when everyone does it and to absurd scales.
I think Ron Paul has just attached himself to a set of principles without understanding why those principles are worth having.
Well, it was nice voting for him, but never again…
Really disappointed… today…
Like or Dislike:
0 
0
Jeff, you say: “I think Ron Paul has just attached himself to a set of principles without understanding why those principles are worth having.”
Really? Frankly, I think it would be a refreshing change if more of our politicos would attach themselves to a set of principles whether they understood them or not.
I too, voted for Dr. Paul, listened to him carefully and donated a lot to his campaign…more than I could afford, actually. Do I fully agree with him? Pretty much, yes, because I believe the country’s original constitution was the best thing the world has ever seen, and Paul is a strict constitutionalist, despite his many years in Washington (which has got to be nerve-wracking for a man of his intelligence and acumen). He knows his history, he knows his economics, and he knows the history OF economics. He can forsee how such regulation as is now being proposed will play out.
To suggest that he promotes principles of which he has no understanding is fatuous. His very consistency of thought in his voting record, his writings, and his countless floor-debates gives the lie to your statement. As for your bullet points:
1) Someone (you and I) must pay for all the “people and processes” banks have to deal with all the unnecessary and presumptive regulations. My little bank doesn’t have them.
2) Paul is already considered deranged enough by those too brainwashed by consolidated MSM to think on their own, without accusing the IRS of anything more than what they are already guilty of (their very existence), which has precisely zero to do with the topic at hand, in which (I’ve been watching the hearings)Geithner and Bernanke are proposing what amounts to nothing less than an Economic Patriot Act for Homeland Economic Security, may God help us all.
3) What does having “to rely on public defenders” have to do with the topic? The fact, as we all know (in the Madoff case for example), is that the extant regulatory agencies have had proof of fraud for years and failed to act. Why create yet more regulations (to be enforced by, again God help us, alumni of Goldman Sachs and Morgan Stanley) when we don’t enforce the ones we have? Seems to me that turning a regulatory blind eye on fraud is a form of Public pre-Defense (in that it is the public who pays the regulators, and who is as well the victim). “Banks have the resources to defend themselves…?” Where’d the large, failed banks get these resources? From us, and from their kindly Uncle Sam. And where did he get them (or hope to)?
4) The concern which Paul is addressing here is specifically the proposing of sweeping regulations which will proactively punish ALL banks (including mine, a small, solid, century-old family-run operation which wouldn’t know the first thing about credit default swaps or derivatives and never in its history issued a sub-prime loan). Or haven’t you been following these hearings? This is not a broad philosophical discussion. It’s an attempted coup which will potentially put the Fed Reserve and the US government jackboot heavily into over 8,000 banks throughout the nation, not the just the handful of investment banks being bailed out by our grandchildren’s tax dollars. All banks. They’re not differentiating between investment banks and commercial banks, speculatives vs. lender/depositor because Phil Gramm’s Act did away with the distinction just before the turn of the new century (which is when these troubles began to gain real legs).
5) Not sure what you meant to say here, as you’ve omitted a key word after the “VERY”, leaving us to fill in the blank. But you seem to again be trying to compare apples and oranges, a gunman to a swindler. Ron Paul was clear: Whether you call it “criminal” crime or “civil” crime, felony fraud is a crime (Geithner was burning time by asking for an irrelevant clarification, because he quite rightly fears to debate Paul; in fact I had to wait for this clip because CNBC cut into it before Geithner could be embarassed). We’ve already got laws on the books against crime. We have truth in lending and we have a law against Ponzi schemes. We have a specific law against naked short selling, which means selling something you don’t own and can’t produce–a crime in just about every culture, ever. We once even had a law against insurance companies, investment banks, and commercial banks mixing and matching functions, owing to obvious conflicts of interest (till Clinton, anyway) in the quite targeted effort to prevent a repeat of the run-up which led us into a worldwide Great Depression. (Freshen up on Glass-Steagall, 1933 then Gramm-Leach, 1999.) The “game” in the “game theory” to which you refer is musical chairs which, indeed, does always end poorly. For someone.
For us, actually. The retirees, the worker bees, and our progeny.
6) “It’s not even really a crime from a single actor’s perspective,” you say. What’s not really a crime? Selling insurance you can’t possibly cover? Selling shares you don’t own? Lending money you know will never be repaid, then bundling and selling the debt to an unsuspecting buyer (including, in some cases, a European subsidiary of your own company, for them to resell for even more bogus gains)?
I’m pretty sure that the laws of any developed nation you care to name call these actions criminal fraud.
Not to understand what Paul is voicing opposition to, while yet arguing against his logic, is to create a straw man argument. He’s trying to protect 8,000 autonomous private banks in the US from coming under the heel of a new regulatory agency, staffed by Wall Street insiders. The parallel between 9/11 and the don’t-read-it-just-sign-it Patriot Act, and Wall Street bailouts followed by this brazen power-grab effort, is unmistakable.
Like or Dislike:
0 
0
Scott, do you really expect us to believe that you followed Ron Paul campaign, became a supporter of his or libertarian principals. Voted for him by writing him in on the ballot or in the Republican primary either way. Then changed your mind due to his ramblings on fiscal responsibility and banking. If Ron Paul is one thing he consistent so I question your “it was nice voting for him”. I think I can spot a liberal when I hear one
Like or Dislike:
0 
0
I would also like to thank you for the transcripts, i may not be deaf but i can read something much faster than watch it, and glance at it to see if im even interested.
Like or Dislike:
0 
0
I agree – I am unable to watch the videos often times but am able to read the transcript and like TruthTaco said it’s nice to be able to glance at the transcript and see if it’s something I may be interested in reading or even watching later.
Keep the transcripts coming please!
Like or Dislike:
0 
0
I also agree, youtube is banned on my network, so I have to read the transcripts. Thanks for them and everything else
Like or Dislike:
0 
0
I just wanted to tell you guys who run this website: THANK YOU for providing transcripts. I am deaf and it’s difficult for me to understand Ron Paul or anybody in these videos without captions or transcripts. Please keep on doing it!!!
Like or Dislike:
0 
0