In his opening statement at a hearing entitled “Regulatory Restructuring: Balancing the Independence of the Federal Reserve in Monetary Policy with Systemic Risk Regulation“, held on July 9, 2009 at the House Financial Service Committee’s Subcommittee on Domestic Monetary Policy and Technology, Ron Paul explained that his “Audit the Fed” bill HR 1207 won’t affect the Federal Reserve’s authority to conduct monetary policy as it sees fit. He said, “We are not looking for the Congress to run monetary policy. We just want to know what’s going on.”
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
Mel Watt: The gentleman from Texas, Mr. Paul is recognized for 4 minutes.
Ron Paul: Thank you, Mr. Chairman. And welcome to Chairman Kohn. I’m delighted you’re holding these hearings today because it deals with a subject that I’ve talked about for many years, and we’ve had earlier discussions and the Fed’s position, of course, is that they do reveal a lot of information. And even in the testimony that we’ll hear today they still argue the case for exceptions and the argument being that they don’t want the independence of the Fed threatened, and they don’t want it to be politicized.
Well, when a lot of us think of independence we put another word in there automatically; that means “secret” and “clandestine” and “serving special interests.” So, it’s a nice word of independence, but, politicized… there’s no goal… I don’t have a goal of making it political other than the fact that the whole system deserves political attention.
And yet it gets so little attention, it has not had as much attention over these many, many years. But there is good evidence that it has been politicized already. There have been journal articles written and books written about how the Fed has been influenced by the presidents over time.
And that when a reappointment time was coming up, policies were designed to serve certain administrations. So I would say that to argue the case that it should never be politicized is, you know, an argument against what we have because it has been known to be politicized.
One other point I want to strongly make is the bill that I have offered, the HR 1207, has been challenged at times. And I think it is justified to at least question and that is, how much would my bill affect monetary policy. And it doesn’t. It doesn’t affect it in any way whatsoever. We are not looking for the Congress to run monetary policy. We just want to know what’s going on. And why, in these discussions, why wait five years to hear the debate? There’s a strong argument made that the sooner the markets know what you’re thinking or what you’re doing or what the plans are, the better off [we are].
When I first came to Congress we weren’t even allowed to know what the targets were going to be, and the markets immediately after the meetings agitated, “what are they doing,” and they figured it out. And all of a sudden they started announcing it, it wasn’t the end of the world yet they argued, “well no, you’re not allowed to know.”
There is a strong argument now that more we know about what has been going on in this last year, the more it would have helped the markets. It’s the unknown and that is why we need a much more open Fed. And the people are demanding it; they want transparency. Transparency is a good word. But to say that a little bit of transparency is good, but we can’t have a lot of it… “There are certain things we don’t want you to know what we’re doing when we’re talking to foreign central banks, foreign governments, international organizations. What kind of agreements we have with the IMF.” We have an obligation, a moral obligation here in the Congress to know exactly what the agreements are, and we’re not doing this to preempt anything.
This is the reason why the support for this bill that I have is now up to 255 and it’s across the board; liberals, conservatives, progressives, populists and libertarians are all supporting this. And there is no agreement among those groups of what monetary policy ought to be. They don’t want to make it a political football. They’re not asking for Congress to participate in the FOMC meetings, but to know what the strategy is and what the plans are.
That is legitimate information and we shouldn’t be afraid of the truth. There have been arguments over the years made about transparency and I can give quotes and may later quote from Alan Greenspan. And when you look at those quotes generically they are very, very good. But when it comes down to the bottom line they say, “Well, we want you to know what’s going on the unimportant things. But when it comes to the important things, we want secrecy.”