Ron Paul to Ben Bernanke: The Federal Reserve Is Already Politicized

“What about today? Interest rates are artificially low. Could there be any political pressure to keep interest rates artificially low? Historically, that’s been well known, it’s been documented and written about, how other Federal Reserve chairmen, they were on the verge of reappointment and they know the president, and all of a sudden… so, it’s not that it’s not politicized now. Just the fact that they can issue a lot of loans and privileges to banks and corporations, that’s political.”

(Full transcript below)

Event: House Financial Services Committee Hearing
Date: July 21, 2009

Bill Posey and Alan Grayson continue questioning Ben Bernanke:

Thanks to LibertyMaven for putting these videos online.

Transcript of Ron Paul – Ben Bernanke exchange:

Ron Paul: Thank you, Mr. Chairman. In the past, most members of the Federal Reserve Board, including your predecessor when they come before the committee, they endorse in general the idea of transparency. They don’t just say, “We’re against transparency.” It’s the definition that really counts. Most members then would also argue for independence, which generally means that they don’t want the Congress to know exactly what they’re doing.

But I saw the article today in the Wall Street Journal, not your editorial but an article and there are a few quotes there that I wanted to ask you about and I do know that all of us can get misquoted in the newspaper, but I want to clarify this because it’s either misleading or somebody is confused and I wanted to see if I can figure this out.

And the first one had to do with you saying that Mr. Paul’s bill, which is 1207, the transparency bill, would interfere with the Fed’s interest rates decision, and since I wrote the bill, and I know what the intentions are, it has nothing to do with interference with monetary policy or interest rates manipulations. There’s nobody in the Congress who is going to be monitoring the Federal Open Market Committee. It’s after the fact that an audit can occur and find out what transpired. There is no management.

So is that your position that this bill, if it were to be passed, would interfere directly with interest rates, setting interest rates?

Ben Bernanke: Well, Congressman Paul, at some point, as you know, we’re going to have to start raising interest rates to avoid inflation, and people have talked about the politics of that and how whether the Fed will be able to do that without intervention or interference. If we were to raise interest rates at a meeting and someone in the Congress didn’t like that and said, “I want the GAO to audit that decision”, wouldn’t that be viewed as an interference or at least in that expose…

Ron Paul: I wouldn’t think so. This is just reviewing it and you can do what you want. What about today? Interest rates are artificially low. Could there be any political pressure to keep interest rates artificially low? Historically, that’s been well known. It’s been documented and written about how other Federal Reserve chairmen, they’re on the verge of reappointment and they know the president and all of a sudden… so it’s not like it’s not politicized now. Just the fact that they can issue a lot of loans and special privileges to banks and corporations, that’s political. This idea that it would be political, because we know what happened afterwards, just doesn’t seem to add up.

Since time is short, I want to go on to the next quote, which I find fascinating because hopefully I can agree on you on this one. The actual quote is this, “We absolutely will not monetize the debt.” Well, that’s one of the major reforms sometime in the distant future, that would be beautiful because that would stop all this chaotic monetary policy, inflations and depressions and recessions and all the mess that we have, but you say you will not.

At the same time, I quoted the $38 billion that was bought last week and the plan to buy $300 billion of US securities. These securities are bought by dollars you create and if you’re buying US securities, what is that if it’s not [monetizing the debt] and besides, if the markets really believe that, you would absolutely not monetize debt, I think the market will get hysterical. So it’s seems to me like I’d like to understand exactly what you mean by that.

Ben Bernanke: Well, the purpose of our limited program was to address the private credit markets, Congressman. When we complete the $300 billion program that we announced, we will have less treasuries on our balance sheet than we did two years ago because we sold off a lot of treasuries in order to make room for these other things that we’re doing.

Secondly, after we complete that $300 billion, our share of outstanding treasuries will be at one of the lowest points that’s posted in our period. So we’re not taking a significant portion of US treasuries and we are not actively intervening or actively trying to make it easier for the government to issue debt.

Ron Paul: So you’re saying if you buy $300 billion worth of US government debt, that is not inflationary. The true definition of inflation is when you increase the money supply and the immediate consequence is it sends out false bad information to the marketplace, so whether it’s when the bubbles are being formed or afterwards, all you’re doing is inflating constantly; you’ve doubled the money supply, interest rates are artificial, people make mistakes. So it seems to me that you’re in the midst of massive inflation, but I guess you have a different definition. When you double the money supply, that’s not inflation itself? Or are you looking at only prices.

Ben Bernanke: May I respond?

Barney Frank: Briefly.

Ben Bernanke: Inflation is the change in the price of the consumer price level, which is very stable right now and the various measure of money, as you know, in the broad measures of money, the measures that cut the measures of money in circulation like M1 and M2 are not growing quickly.


  • Freemenright!

    I think Alan Grayson must be frustrated that his time ran out during his questioning of Bernanke. It also seems that Bernanke has utter contempt for any questions seeking the truth of where the money has gone!! It is obvious to any sensible human being if you look at the start of the economic melt down how the oil price was manipulated to create a massive surge in inflation and pressure on every UK/USA individuals(the price doubled in two months!!!!). The amount of money required to corner the oil market is quite extraordinary and the small group who achieved it would require a business like the Fed or huge bank to underwrite the deal. It is also worth pointing out that the Gold price is set daily at three PM daily by 5 banks in London(note I say London and not british banks , because the major shareholders are international and based off shore!!). The price of oil is also controlled by a small number of market making organisations. This means that the so called free market principles that we are told exist is actually a myth and we are rapidly becomming a world resmbling the story book ‘animal farm’ where those at the top have everything and those the rest of the way down never have an opportunity to aspire!! I am English, but as well as this being un English I would say that it most un American and not what the USA since independence stands for!! My First ever blog!

    • Christine

      Welcome! We are all in this together. The more who see the truth the easier it will be to counter the misdirections of our governments and not be fooled by them. We need a force of truthtellers. Glad to have you among us.

      I absolutely love Daniel Hannan’s outspoken and brilliant remarks!! I watch them over and over for the sheer delight in watching his gutsy-ness to speak the truth even while it is not popular and so many are asleep.

      Daniel Hannan MEP: The devalued Prime Minister of a devalued Government

      Daniel Hannan MEP on Europe’s Marxist Common Agricultural Policy
      (our farm are being attacked also)

      Here is some powerful advice…

      We The People Stimulus Package

  • longshotlouie

    Fed Vice Chair Donald Kohn Grilled by Grayson

    • Christine

      Don’t you just love this Alan Grayson?! I do. He’s such a good interrogater, asks the direct questions, is relentless. Check out more of his interactions on youtube with the FED. He is speaking up for all Americans! I appreciate his work, his style, he’s going in for the kill. They say he’s new. Maybe that’s exactly what we need….and more of them! Congressmen and women with some guts. I was going to say something else, but it wouldn’t be fitting for congresswomen.

      The excuse the FED always gives, no matter if it is Bernanke, or Kohn or Coleman to remain secret is not working for America….never did.


  • Christine

    Ya gotta love Alan Grayson!! His video is worth several replays just for the feeling of heightened satisfaction. We need to clone him! He’s got the powerful voice and manner. He leads the one being questioned into his well planned trap of exposure! He appears to be thoroughly enjoying himself too.

    In this update from Bernanke, congress is referencing the problems looming in commercial real estate, with commercial banks not lending…and the residential market with foreclosures still barely moving….then walks right into exposure of the FED lending money to foreign countries (not before the crisis, only after, or can it be said that it was at the beginning of the crisis to feed and ramp up an American economic crisis in addition to all else? …the planned and orchestrated demolition of America.)

    An aspect of this that we are all concerned about, those who know who is behind the economic crisis is …how do we outst the FED and recover. We’d like a glimpse of what is up around the bend.

  • Leah

    The Fed is a scam, always has been, as it is in the UK, (BoE); and elsewhere. Take away its control, use it instead, Congress tell it what to do.
    The Fed and its friends caused this criminal shambles, they have enriched themselves through it at the expense of ordinary working Americans. Very highly qualified crooks is what they all are, in my opinion.
    Thank you.

    • Ross

      Leah,they have done a lot more than steal from the American people.Your wealth is in your people and when they create poverty through debt slavery,inflation,depreciation of currency etc they are reducing the awarenss intelligence thus aspirations of the US people,thus further diminishing wealth for all.They have the US economy in a downward spiral.

      Slavery does not raise the aspirations of any nation.They cannot be creative because they are too busy just surviving.This reduces total productivity in a modern world.

      The Fed is an abomination of the the last century which origins 200 yrs before that with the Rothschilds.It is a self serving atrocity that gives parasites a good name.

      At least repectable parasites know when to leave the host and find a new one.

  • Ross

    Bernanke,”Inflation is really the changes in consumer price levels..” Bernanke sees no inflation happening now even with the doubling of the money supply? So where is this newly generated money going,if the real economy of production and the consumer are not being stimulated by this contrived liquidity?

    Could the Fed be bailing out too many of it’s mates and also buying up devalued assets with tax payer debt money? How can you charge the US people interest on monopoly money [ie counterfeit money]and expect them to work harder for your own failure and avarice?

    So when inflation eventually does kick in,the Fed will make the tax payer cover the debt for the bail out of their own mates through higher interest rates? It is a win win for the Fed.Steal from the public by inflating the currency and steal again by charging interest on inflated money.

    If those in Congress who have failed to support HR1207 think that sitting on the fence will save them,then they’d better think again.This a moment for courage and clear thinking.Either they are with the American people,or they are against them.

    • Thor Mikkelson

      Talking to my friends in high places, the reason bernanke does not believe that doubling the money supply will increase inflation by the same amount is that the increased money supply was given directly to the uber rich owners of the fed.

      If you give money to a rich person, they will probably invest 95% of it into investments that are used to high trading value. For example, if you tried to buy $1,000,000,000 dollars of canned tuna, the price is going to be very very high. But lets say you tried to buy $1,000,000,000 (billion) dollars of exxon stock, the price of exxon will not vary that much if you spread the purchase over several days if not months.

      Conversely, if the fed’s newly printed counterfeit money goes into the poor households, new car prices would double, as well as gasoline, and other items poor people are likely to spend on.

      So it isn’t that hard to imagine bernanke when he does not expect inflation to rise as quick, because all of the money was given to rich, who will invest it mostly in non-consumer items.

      Understanding these issues helps when you have a major in economics..

      • VR

        That conclusion does support the argument that Americans just paid off the gambling debt of the Bankstas, and they will be back for more.

      • Christine

        When will Americans collectively say…. “I’m just not paying for that, or that, or that, or that, nor that either!”

      • Ross

        Thor; You don’t need a major in economics to recognise a scam and a thief.Where were all the economists warning of this collapse [GFC] before it happened? They have no credibility.

        • Thor Mikkelson


          You are assuming many things. You are assuming that the financial crisis was an unintentional mistake by the big banks to obtain billions of dollars from the taxpayers. You assume that people outside the loop of this “mistake” had enough information to predict such an event.

          I would disagree with your assumptions that it was a “mistake” on the part of the banks. I believe high level banking owners and management, have planned the collapse of one or more of the failed financial institutions, that the true owners of the big banks have for years secretly withdrawn wealth from the banks and sold them worthless derivatives.

          The final outcome of the situation is as follows. Small investors out of the loop have purchased worthless stock, and have lost money. Large investors inside the loop have made tremendous money, because they are able to time the market from their inside information. Financial institutions have become more powerful, have been given more money, and have become more centralized. The large banks are more powerful than they have ever been. The large investors have made more money than they have ever made. Due to small investors losses, large investors have not only gained tremendous money, but now they have unimaginable money compared to the people who lost thousands.

          It isn’t about how much money you have. It is about how much MORE money you have. One million in 1950’s used to be alot of money. One million today isn’t much compared to what everyone else has.

  • Lindsey Brutus

    Posey and Grayson were two of the earliest co-sponsors of HR#1207. They really fried Ben, especially Alan Grayson, the rookie Rep (and a Democrat).

  • mitchbupp

    Time to put the moneychangers at the FED out of work. I am willing to put my name on a lawuit to sue them for the trillions their illegal actions manipulating the US currency. They have not had any authority to do it since Kennedy signed an executive prohibiting them to act as the US federal reserve five months before he was murdered.

  • Christine

    C-span – Bernanke reports to congress about the economy …
    And Ron Paul has another opportunity to fire his arrows at the FED!

  • longshotlouie

    “I know the blogs are best at debunking myths that can slip through a lot of the traditional media outlets, and that is why you are going to play such an important role in our success in the weeks to come.”

    – Barack Obama


    • Christine

      Yeah, Buddy

  • Fed Liberation Army

    I’m all for Fed independence. The Fed should be an independent business, open to free-market competition and without any monopoly powers. Free the Fed NOW!!