News Anchor: I want to actually bring in Congressman Ron Paul. In fact, Treasury Secretary Tim Geithner is on Capitol Hill right now trying to sell the President’s massive financial overhaul plan. Geithner is testifying before the Senate Banking Committee. And moments ago Geithner said that the government has to act now to protect the system from another potential collapse.
Timothy Geithner: We came into this crisis without an adequate set of tools to confront and deal with the potential failures of large, complex financial institutions. That left the government with extremely limited choices when faced with the failure of the largest insurance company in the world, and some of the world’s largest investment banks.
News Anchor: Now later today secretary Geithner is actually going to head over the other side of the Hill to testify before the House Financial Service Committee. And our next guest is one to watch when that happens, Republican Congressman from Texas, Ron Paul joins me now live. He’ll be questioning Secretary Geithner this afternoon. Congressman Paul, good to see you, sir.
Ron Paul: Thank you.
News Anchor: Congressman Paul, so is your perspective that Tim Geithner needs to dramatically change his approach at this point? We’ve seen Paul Krugman and other economists say the worst thing that could happen right now is for the government to ease up on the stimulus and other things, that it could lead to another crash. What are your thoughts?
Ron Paul: Well, it would be good to stimulate the economy, but you don’t stimulate it by doing the same thing we’ve done for twenty years. And the policies that gave us our trouble can hardly be the solution. So spending more money and borrowing more money and inflating the currency will not solve the problem.
They’re making the assumption that it was a lack of regulations that caused our trouble. And yet we had banking regulators and we had SEC regulators and FDIC regulators. We had a ton of regulations and they failed. So they say, “Well, we just need more.”
It’s sort of like what the outcome of Enron was. We passed Sarbanes-Oxley, now they’re trying to repeal Sarbanes-Oxley because it contributed to the problems in the earlier part this decade. So I would say they are on the wrong course, and to me it’s very, very disturbing that they have no confidence in the free market and they have no interest what so ever in looking at the root cause, and the root cause is easy credit, artificially low interests rates, inflating the currency, excessive spending, excessive debt, too much taxes and they’re going in the wrong direction.
And believe me, there is reason for the polls to be shifting away from the administration because they’re digging a bigger hole for us.
News Anchor: But Congressman Paul, the first thing you said in that line was “easy credit”. Are you not at all concerned with the role, for example, that some of the credit rating agencies played in that, which in part allowed people to get more access to credit. I don’t just mean individuals, I also mean large corporations. Are you not at all concerned that some of the regulations weren’t well enforced?
Ron Paul: Well, what you’re trying to say is the regulations could compensate for the easy credit. It wasn’t the regulators who created the credit, it was the Federal Reserve that pumps up the money supply and artificially lowers the interest rates. Then the regulators are supposed to come in and adjust. You might say the housing bubble should have been stopped by the regulators.
But Congress and the regulators actually forced some of these sub-par loans, they had to give loans with no down payment. That wasn’t the fault of the regulators. So the regulators failed because the system of regulations can’t possibly compensate for the errors that are made by the Federal Reserve in creating a monetary system that is just not stable at all.
News Anchor: Congressman Paul, I want to bring in my colleague Chuck Todd who is the political director for NBC who just completed our poll that talks about some of the concern among the American people for some of the spending. Chuck, you have a question for Congressman Paul?
Chuck Todd: Well, I want to ask the Congressman… so we do regulation right now, you say you want to get rid of some of this stuff. But obviously there was some missing regulation. Maybe the SEC didn’t have enough correct people there so, you know, where do you regulate?
Ron Paul: Well, what you’re statement says is that it proves that regulations didn’t work or it was misdirected. The regulation should be on the Federal Reserve. We should have transparency of the Federal Reserve. They can create trillions of dollars to bail out their friends and we don’t even have any transparency of this. They’re more powerful than the Congress. So yeah, we do need regulation.
Chuck Todd: But isn’t the Treasury Secretary… one thing about this new plan from the administration is that they do want to actually try to bring some more transparency and accountability to the Fed. I know it’s not as much as you’d like to see, but is it not an improvement?
Ron Paul: No, no. They’re giving a tremendous amount of more power to the Federal Reserve, the very institution that created our problem. I mean that’s about the way Washington works. Too much regulations to begin with, so they give them more. The Federal Reserve creates the problem so we give them more power. It’s fiat money that is the problem, so we allow them to double the money supply.
You just can’t solve the problems that way. That’s like saying you can take care of a drug addict by just giving him more drugs. And that’s what we do here in Washington, we spend more, we tax more, we print more, we regulate more. We don’t have any belief or confidence or understanding of how the Federal Reserve created the problem and how the free market ought to work.
News Anchor: Congressman Paul I hope you will come back and talk to us a little bit about that more in the future. Thank you so much for joining us.
Ron Paul: Thank you.