News Anchor: More now on the President’s plan for regulatory reform that gives new powers to the Federal Reserve. What will the reaction be in Congress? We’re joined now by Texas Republican Ron Paul. He’s been a vocal critic of the Fed. Congressman Paul, welcome to Bloomberg News.
Ron Paul: Thank you, it’s nice to be with you.
News Anchor: Congressman, I was wondering if you might give our viewers and listeners your reaction to what the President had to say this afternoon.
Ron Paul: Well, I’m not too excited about it because I don’t think I see anything positive in it. I think it means that the interpretation of our problems is completely wrong. It’s based on the assumption that we don’t have enough regulations, rather than looking at the root cause, and, of course, to me the root cause is the policy from the Federal Reserve that causes the excessive investments and the malinvestment and excessive debt and all these problems and the fixing of interests rates. When you have that you get the bubbles built. But instead of recognizing that, instead of looking at the foundation of the system they’re going and saying, “Well, we need more inspectors.” You can’t fix it if you don’t look at the real foundations; to me that foundation is a sound currency.
News Anchor: Well Congressman, do you think this is a “band aid to cancer” approach?
Ron Paul: Yeah, it’s not even a very good band aid. As a matter of fact I think it’s ripping the wounds open because we’ve committed in the last year $13.9 trillion and actually have injected that into the system. Nearly half of that… and it’s going to keep going. So the spending will continue. The borrowing will continue, the inflation will continue and that just leads to more problems. But not diagnosing the problem right leads to this. I mean, instead of the invisible hand to guide us through a free market economy, we’re looking for an iron fist.
News Anchor: Right.
Ron Paul: And this represents an iron fist. Sarbanes-Oxley was done after Enron and now we’re trying to repeal it because of all the harm it caused. So these regulations will do the same type of prolongation of our recession or depression as did the regulations in the 1930s.
News Anchor: Well Congressman, if not the administration’s plan, then what? What would Ron Paul’s plan look like?
Ron Paul: Well, what we would have to do is go back to free market capitalism. We would have to quit inflating, we would have to let the bankruptcy process go through. We can’t have political bankruptcies where individuals and some special companies can get bailed out.
We want bankruptcy to occur, liquidation of debt, reduce the taxation dramatically, reduce spending and once again encourage people to understand and promote the system of capitalism where capital comes from savings rather than out of a printing press of the Federal Reserve. You can’t have free market capitalism without savings. They don’t want you to save, they want you to spend and that’s what everybody is doing.
News Anchor: And Congressman, as the President at least strongly suggested, that this regulatory overhaul would change the playing field, and it would do so specifically for the Federal Reserve. And, as I mentioned, you have been a vocal critic; so much so that you’re sponsoring HR 1207 – that’s the Federal Reserve Transparency Act of 2009. There are over 200 co-sponsors, including over 50 Democrats. What is this legislation, what are you looking to do?
Ron Paul: Well actually, we’re doing a little bit better. It’s up to 234 and 65 Democrats and we’re doing very well. What it does is that it means that we can audit the Fed and find out all the promises they made. All the guarantees and how they’ve been involved in other central banks and other governments and international financial institutions.
So, we would find out what’s going on. And even Obama talks, and he used the words “more transparency”. But they’re doing exactly the opposite. I don’t believe they’ll give us real transparency. At the same time they’re giving the agency of government… pseudo-government, pseudo-agency… the Federal Reserve more power, and they’re the culprits. They create the bubbles and here we’re giving them more power. This is allowing the fox to protect the hen house. It just can’t work; it’s going to make things much worse.
News Anchor: Right. Texas Congressman Ron Paul joining us from Capitol Hill. Congressman, thanks.