Date: June 17, 2009
History of the Federal Reserve
Ron Paul: Central Banking has been tried off and on throughout our entire history. It was an argument between Jefferson and Hamilton. Hamilton liked it and he got the first national bank started which was a type of a central bank and Jefferson didn’t like it and he eventually allowed it to expire. Later on they had the second national bank and Jackson managed to get rid of that because he didn’t like the power that was placed in their hands.
And basically we haven’t had a central bank over all those years until 1913 when the Federal Reserve came into existence. And it was set up to be rather secretive and they said they had to have it because of the panic of 1907 and it was to prevent all the business cycle problems that we had in previous years.
And yet, since that time they’ve caused a lot of trouble as far as many of us are concerned from a free market view. They were the ones that created the inflation for World War I, the depression of 1921, the inflation of 1920s, the depression of the 1930s and on and on. But they have never had to be audited and we do not know exactly what they do.
There was a move in the 1970s to audit the Fed because we had rough economic times in the 1970s. We had high unemployment with a high inflation rate and they finally got a bill passed in 1978 that said that the GAO could audit the Federal Reserve. But like they do so often here is that when you pass something with the pretense of accomplishing something, they do exactly the opposite. Actually the bill gave the Federal Reserve more privacy and more secrecy because it excluded all the important things that we needed to know about. So essentially they have been working in secrecy ever since, and right now because of the financial crisis we’ve had a much better chance at this and that is why we’re moving along with our effort to get this bill passed.
HR 1207 to Audit the Federal Reserve
Ron Paul: Off and on over the years I’ve always had this piece of legislation that essentially got no attention. But this go around it seems to have caught on at the grassroots and there was an organization called the Campaign for Liberty that worked real hard on this and they motivated a lot of people to call their Congressman. And now we have about 70 Democrats and a total of 230 cosponsors of the bill. Which means now it is very popular to get transparency of the Fed.
But I think basically that it came out of the TARP funds, you know, when they came and started passing these hundreds of billions of dollars of bailout funds for the various corporations, car companies and banks and insurance companies, and the Congress did it so carelessly. All of a sudden some of this money went into providing special benefits for special companies as well as huge retirement bonuses for individuals.
This outraged the American people and then a few individuals in the media started filing suits wanting to know where these TARP funds were going which the Treasury was in charge of. They also caught on to this whole notion that the Fed is involved too, making loans and making guarantees and doing a lot of other things. So this was translated over as saying, “If we’re going to have transparencies of hundreds of billions of dollars, why don’t we have the transparency of the trillions of dollars that the Federal Reserve has been involved in?”
Discharge Petition to Push HR1207 to the House Floor?
Ron Paul: Not seriously, because it’s not practical and we have a long way to go to give up on the system. We probably will have some hearings, Chairman Barney Frank of the Financial Services Committee is not exactly hostile to it. I’m sure he wouldn’t endorse everything I would like to see done, but he, in general, favors more transparency of the Fed. He would very likely transfer that authority to the Congress and to the Banking Committee. Of course, I want to return most of this authority to the marketplace. I don’t want anybody setting interests rates.
But nevertheless, both left and right support the principle of transparency. So I think we have to wait a little while longer, work harder in the Senate. Jim DeMint, a Senator from South Carolina, now is supporting the same bill in the Senate [S 604] and this is very helpful and we’re moving in the right direction. I think it’s premature to talk about a discharge petition, besides it’s not very practical. The Democrats that have been signed on, believe me, that is a major, major request to go that next step and sign a discharge petition. That’s not likely to happen.
How Much Time in Committee Hearing?
Ron Paul: That’s hard to say because the likelihood of the bill coming up as a free-standing bill, I would say, is not very good. Dennis Kucinich has passed one bill that has some reforms in it and some transparency of the Fed in the government reform package and that bill may come to the Financial Services Committee. Maybe we can make it stronger. It may be that some of our proposals will be put on to a larger House version of total reforms and it’s just hard to say what would happen because it has a long way to go. Which bill it’s one, free-standing versus the bill Kucinich passed, or into a new bill they’re working on right now.
Then it has to be passed by the Senate, then it goes to conferencing. That’s when the special interests who feel like they’re being attacked will really work hard and try to spread panic throughout the Congress saying “You can’t do this, this will be a disaster”. But they know what we’re doing.
But you know, in one way though I don’t worry a whole lot about it because the main job is to wake the American people up and if we get closed out it will be proof positive that they are not very anxious for the American people to know what they are doing, and it will be a big step forward toward monetary reform and need to do something about the Federal Reserve if they feel so strong about this that they won’t even allow the Congress to know what’s going on. It’s good information one way or the other.
Will Barney Frank Co-Sponsor?
Ron Paul: I don’t expect him to co-sponsor the bill. The leadership in the majority party usually does not do that. If they want a bill they’ll have their own bill. So traditionally they just don’t do that. But I’ve spoken to him a lot of times about it, and as a matter of fact for years and years and even when they were in the minority party and he always talked about, ‘Well, Ron if we ever get charge I’m going to help you get more transparency of the Fed’. So this is not a new issue with him or with me. And I don’t know where he will come don’t with the final version of it. He maybe on the side of weakening the bill for all I know. But so far he has not said, “Forget it. We’re just not going to mess around with this”. That hasn’t been it at all and for that reason we are going to have hearings in a week or so on this in the Sub-Committee on Monetary Policy.