Venue: House Financial Services Subcommittee on Domestic Monetary Policy and Technology
Hearing: Regulatory Restructuring: Safeguarding Consumer Protection and the Role of the Federal Reserve
Jim Carr’s complete testimony (pdf)
Ron Paul: Thank you, Mr. Chairman. I have a question for Mr. Carr on how optimistic he might be about what we’re trying to do. I tend towards pessimism at times, and I think the problem is almost bigger than what we’re dealing with here and we’re just dealing on the edge of the basic problem.
So the system that we’ve had has been around a long time. We’ve had a system that some people referred to as capitalism that was unregulated. I happen to think that it doesn’t have much to do with capitalism. It has to do with corporatism where corporations seem to get the benefits of some of the programs that are designed to help the poor.
We have multiple programs that has been going on for a long time designed to help the poor and yet sometimes I think that is so superficial. The poor seems to become more numerous and poor and especially since the crisis has hit, but it’s always on the pretense to help the poor, and yet the corporations tend to make the money. So they make the money and they have the power and they have the insight with some of our financial institutions including the Federal Reserve and whereas bubble forms, they benefit and nobody complains too much if it seems to satisfy a lot of people.
But when the bust comes, then we have a bailout, but who is the bailout served? Do we immediately go out and bail out the people that we tried to get houses for? No, we immediately go and bail out the system. So the system is so deeply flawed, so they make money when the bubble is being formed and they get bailed out when the bubble bursts that we come along with a new system that we hope will work.
But the housing program, for instance, we want houses for the poor people, but developers make a lot of money. Builders make a lot of money. Mortgage companies make a lot of money. The banks make a lot of money and all of a sudden, the system didn’t work very well and the poor get wiped out and they lose their houses.
So if we don’t address that major problem, the structure of the system, this corporatism, which has invaded us, how can this idea that, “Well, we’ll regulate a little bit in order to protect the consumer.”
So, I guess, I’m rather cynical and I want you to tell me whether you share any of that concern, whether my cynicism sometimes is justified or not.
Jim Carr: Congressman, I appreciate the question because I agree with much of what you just said. One of the problems that we have in this country is that we have the financial system operating on one side of the ledger and we have special programs for the poor on the other.
The way the poor became solid middle class in this country was by having a financial system that built their wealth and public policies working with that financial system coming largely out of the Great Depression that built the vast majority of our middle class. We do not have that now. Instead we have a banking system that looks at consumers and says, “How can we exploit them?”
And that is problematic. And until we change that system such that when a bank and a financial institution is reaching to a consumer specifically to promote the economic mobility of that consumer and build their wealth, if that’s not their goal, if that’s not what’s going to be accomplished by their products, the poor will remain poor and all the federal subsidies in the world won’t help them. That is why it’s so critical to put into place an agency that actually combines the knowledge, the collective wisdom of people who understand the banking system, the financial system, and understand it as their mission to promote the economic mobility of this country.
Because once they’re working together, there will be no conflicts of promoting wealth and stability within working families with safety and soundness from the financial system, and then, Congressman, the other programs that you’ve talked about that had failed so miserably so often, those programs will now have a foundation by which they can actually enhance what’s happening. But if the markets don’t work for the general public, poverty will never be resolved.
Ron Paul: One other quick question. Would you have any objection personally to us knowing more about what’s going on at the Federal Reserve and have an audit of the Federal Reserve?
Jim Carr: I’m not familiar with the Federal Reserve audit. Okay?