Ron Paul Questions Dr. Meltzer and Dr. Galbraith on Federal Reserve Transparency

Dr. Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy, Tepper School of Business, Carnegie Mellon University – Testimony

Dr. James K. Galbraith, Lloyd M. Bentsen Jr. Chair in Government/ Business Relations and Professor of Government, LBJ School of Public Affairs, University of Texas – Testimony (pdf)

Event: Regulatory Restructuring: Balancing the Independence of the Federal Reserve in Monetary Policy with Systemic Risk Regulation
Venue: House Financial Service Committee’s Subcommittee on Domestic Monetary Policy and Technology
Date: 7/9/2009

Mel Watt: I got to be out of here by 5 o’clock, there is another meeting then. I recognize the gentleman from Texas, Mr. Paul, for 5 minutes.

Ron Paul: I thank you, Mr. Chairman, and I welcome the panel, and it’s especially nice to see Dr. Meltzer here. I would like to start with a question to Dr. Meltzer because I want to follow up on his testimony about the Latin American crisis where he mentioned that the Federal Reserve went to the IMF and instructed the IMF to pay interest to those banks that were exposed.

And of course, that was without congressional permission and I think it makes a point, one of the points I’ve been trying to make, which is transparency of the Federal Reserve. It sounded to me like the majority here is for independence, which is a codeword for secrecy, and in opposition to transparency. And it’s always used for the public interest. Of course, I think the public interest is served by exposure and knowing what’s going on and whose interests are being served. And that’s why I would like to see a lot more transparency.

But the question I have for Dr. Meltzer is: Since he is aware of this and he has published this, is this a good reason for us to know a lot more about the agreements that the Federal Reserve makes because they can make agreements with international banking institutions and we have no right… we may have a right under the Constitution that we should, but we’ve given up that right, we’ve given up that privilege. Would this deal is good example of why we need to know more of what exactly the Federal Reserve is doing?

Dr. Allan Meltzer: Yes, let me begin by saying, independence to me, and I believe to many other members of the panel, does not mean lack of transparency; it means protection. The reason we have independent central banks is so that they don’t expand under pressure from Congress, from the administration, from the banking community and from others. We want them to be independent to make their judgment because they are obligated by law to maintain high employment and low inflation. Now, that law doesn’t work very well, at least in my opinion. But that’s why we want independence.

So transparency? How can you be against transparency? But I believe the Congress would be more effective in its over sight of the Federal Reserve if it concentrated much more on outcome and much less on process. Let them make their decisions the way they want to make them. Monitor the process. They are not living up to the mandate to maintain full employment or high employment and low inflation, and that’s what we should be concerned about.

Ron Paul: I thank you, and I’m going to hurry along because our 5 minutes run past rather quickly. But I wanted to ask Dr. Galbraith a question because he’s worked here and he knows the system, so I’ve been rather shocked with what he presented here. You actually talked about the Constitution and then you find out that you’re not supposed to do that around here. We don’t have that much concern about. So I was delighted from my viewpoint that you brought this up and reminded us about Henry Reuss‘ concern about the constitutionally of FOMC [Federal Open Market Committee]. And of course I agree with that.

But I wanted to see if there was a little bit more that you might agree with, because there are some who believe that we shouldn’t be doing anything unless it’s explicitly authorized. And, of course, the Central Bank is not authorized. It’s been ordained by the courts and the Congress, but it was never explicitly authorized.

But the more practical point I might be able to get your comment on is the concept of the budget. I mean, the Fed is a government onto itself. You know, they hire and make their wages, and it doesn’t go through the ordinary process. The Constitution says it should all go through the constitutional process. And also maybe may be you could comment on the foreign agreements; these are like treaties. The Federal Reserve goes and makes these agreements and they pass out money. Does this strike you that maybe that too might be challenged if you happen to come at this from a constitutional viewpoint?

Dr. James Galbraith: Well, I think under the Constitution the Congress has every right for whatever information it seeks from the Federal Reserve. And if the Congress were to decide to change the way the Federal Reserve is funded it also have a right to do that. It seems to me it would be an appropriate decision for Congress to make.

Ron Paul: So they would then have a right… so you would say that my proposal, that we find out more to find out what kind of agreements they’ve made with other governments, other central banks, international banking organization would be right and proper?

Dr. James Galbraith: My own view on this is that as a member of Congress you’re entitled to that information. That would be the position I understood be the case when I was working here 30 years ago.

Ron Paul: Thank you.

  • David Weirich

    Everyone please contact Barney Frank, Chairman of the Financial Services Committee, at (202) 225-5931 and demand that H.R. 1207 be put to final committee report.


  • BradJohnson

    Remind me America, why did we put Obama in office instead of Ron Paul? I campaigned on campus for you Mr. Paul and look forward to 2012!

  • VR

    President Obama is stepping up efforts to maintain public support for his agenda as rising unemployment presents him with the biggest test of his political strength since taking office.

    Faced with an economic downturn that has proved deeper than the White House initially projected, Mr. Obama asked Americans on Saturday to remain patient, arguing that his $787 billion stimulus plan had saved the economy from collapse and put it on a gradual course to recovery.

    Is the honeymoon over yet?

  • Up Side Down

    Please update your site.

    Co-sponsors = 260

  • Up Side Down

    The Fed’s member banks get trillions in interest charges from the U.S. government and the taxpayer which would not be incurred if the government created the credit and money itself.

    Cut out the middle-man.

  • longshotlouie

    And then there is the ‘stimulus jester’ Geithner:
    Geithner said the rate of decline in the economy has slowed, consumer confidence has improved, the financial system is healing, and concern about a financial meltdown has receded.

    And all of the sheople say ‘Baaaaaaa Baaaaaaa’.

    About 2 million jobs have been lost since Congress passed Obama’s stimulus package in February. Unemployment now stands at 9.5 percent, the highest in 26 years. Some Obama allies have been calling for Congress to pass a second stimulus package.

    And all of the sheople say ‘Baaaaaaa Baaaaaaa’.

  • longshotlouie

    July 11 (Bloomberg) — President Barack Obama said his $787 billion stimulus bill “has worked as intended” as he pushed back against Republican criticism that his recovery program has failed to rescue the economy.

    “It has already extended unemployment insurance and health insurance to those who have lost their jobs in this recession” said Obama.

    Obama also said the stimulus program is helping state governments “save” jobs.

    Sell, Sell, Sell


    We all deserve to know what they’re doing with other foreign banks, even if some of it is totally criminal.

    We have to hold this institution to the rule of law, that is WE the PEOPLE’s job since Congress is authorized for that explicit purpose.

    All the backroom deals are a bunch of HOOEY!!!!!!!!!! Everyone get on your Senators especially, and demand, and ORDER EVERYBODY to get on board S 604 so we can find out what they’ve done with that money!!!!

    Then and only then, can we decide what to do with the Federal Reserve..

  • Christine

    Ron Paul is an inspirational human being who happens to be a poltician. He’s brilliant. He puts other politicians to shame, and he is also inspiring others to follow his lead, the co-sponsors of his HR 1207 bill.

    What as meant for our harm, the FED and their greedy, secretive ways, will be used for our benefit.

    The story goes something like this…
    A donkey finds himself down in a hole that he cannot get himeself out of. The towns people come to take a look and decide there is nothing they can do for him. They get their shovels and decide to bury him alive. With each shovel of dirt, it fills the bottom of the hole more and more and the donkey takes a step up, up, up and out of the hole. So it is with the FED/IRS, our elite bankers, the CFR, Bilderberg Group, Trilateral Commission, NAFTA and Al Gore with his plans of “green” riches, and a president who dupped America and others with his hollow promises. They have shoveled so much dirt at the American people intending on burying us alive, but with each shovel full, we step up, up, and up out of the hole, to their surprise.

  • Ron Paul is the one of the few willing to ask real questions. Good for him!

  • tax protests in chicago:

    In the past, it was easier for the ruling elite to control the people by fiat with autocratic rule. Many have fought against inherited rulership, which culminated with Thomas Paine’s biting attacks upon the divine right of kings which led the way for the American Revolution that overthrew the despotic tyrant, George III.

    To overcome the lost inherited tyrannies, the ruling elite began backing “democracy”, which has the root word of “demon” as its prefix. This is no co-incidence. The Founding Fathers of America debated heavily whether to establish its government as a democracy or a republic. In the U.S. Constitution, it is declared to be a republic. Democracy was ousted.

    Now, the U.S. government pretends to be a democracy. In fact, it is a rare American politician who uses the word “republic” and nearly all spout “democracy”. This is because the concept of democracy allows the running of the world by an apparent majority consensus. Whatever the majority accepts as right is forced upon the others. This is the foundation of democracy. In a pure democracy, if 51 percent of the people say it is honourable to go to war against another country, then a war is entered regardless of how adamant the opposition is by the 49 percent who are effectively silenced on a very critical issue.

    Democracy gives the illusion that all minority interests are given a fair voice. This is not the case at all. The minority voices are only allowed if they are consistent with certain governmental purposes. Opposition parties are allowed only if they maintain the illusion of choice or if the ruling party is not strong enough to govern on its own and needs the support of the opposition.

    It is because democracies appear to give the smaller interests a fair voice that democracies are spreading across the globe. Even in countries that are constitutionally formed as republics, the common label given to them is democracy. The United States is a prime example of this — it calls itself a democracy in violation of its constitutional mandate of it being a republic.

    Global leaders are always spouting the glorious benefits of democracy and are trying to infest every country with it. As evil dictators allow very little liberty, it is easy for the people to realise that they have few freedoms, and so rebellion is always on the minds of a suppressed people. However, with democracy and its illusion of freedom of expression, the people are much less likely to see through the tyranny, deception and exploitation. This is why democracy is the preferred form of government for the New World Order.

    • longshotlouie

      Keep shining that light.

    • Wonderful! For years I have been rebelling against the use of
      the word “democracy” instead of republic as you so rightly pointed out as mandated by our constitution.

      I had thought that FDR was first to use democracy but then remembered that Woodrow Wilson used it when he sent our sons
      to Europe in 1917 to “save the world for democracy”.
      How many countries will have the form of our republic BUT NOT
      the substance. SAVE US DR PAUL.
      Also I would like to add that all the Independents who will NOT
      work with other like-minded groups who have some other issues
      that they want to push are simply CONDEMNING US TO THE “SERFDOM”
      ALL HANG SEPARATELY! We can win if we will work together.

  • jeffbrooks

    give them a wake up doc on real american ways,but the new unamerican system brainwash is very hard to break they really beleive they are true americans little do they know they are misguided sheep that are so asleep,hopefully my one in only hero dr ron paul can whip up some medicine to wake these sleepy sheep.

  • give it to them Ron! The people will awaken!