Is the Federal Reserve System based on fraud?

This Wednesday afternoon, Ron Paul joined Peter Schiff, Andrew Schiff, Sheriff Richard Mack, Tom Mullen, Walter Block to discuss the proposed audit of the Federal Reserve, as well as other political and economic developments.

Audio only:

Download the show as an MP3 file here (58:06 min).

Channel: Fox News Strategy Room
Show: Freedom Watch
Host: Judge Andrew Napolitano
Date: 7/29/2009

Transcript of Ron Paul’s appearance

Judge Andrew Napolitano: Now, to our continuing series in examining the Federal Reserve. Last week, Federal Reserve Chairman Ben Bernanke, in an effort to head off Congressman Ron Paul’s bill to audit the Fed, a bill that now has 277 co-sponsors in the House of Representatives alone, and in an effort to make himself appear human and understanding, actually held a 75-minute town hall meeting. This was produced and broadcast by PBS, thus paid for by your tax dollars, and was taped at the Fed’s branch bank in Kansas City. We did not learn anything new, except that Chairman Bernanke is not the expert on the Great Depression that he claims to be.

Now I know that he taught at Princeton. Most of you know that I’m a graduate of Princeton. I’m awfully also deeply grateful to my guardian angel that his failure to understand the lessons of history did not rub off on you or on me. Listen to this, he told his public TV listeners that the one thing he most wants is not to preside over a second Great Depression.

Ben Bernanke: I was not going to be the Federal Reserve chairman who presided over the second Great Depression. For that reason, I had to hold my nose and stop those firms from failing. I am as disgusted about this as you.

Judge Andrew Napolitano: One would think he does not know what he’s talking about. The Great Depression was great, not because of the depth of the unemployment or the magnitude of shareholder or investor loss, it was great because of the duration of the depression. The Fed at the time, the Congress, FDR and a cowed Supreme Court set the country on a course to centralized control of the economy, which brought rationing of goods, artificial interest rates, minimum wages that shut business down, and the confiscation of gold. When they saw how bad they made the bubble burst from the twenties, they manuevered us into a war and that brought on more rationing and the draft. It was not until the guys returned home from the war that a free market was unleashed and the depression ended 16 years after it started. Some people never learn.

Today, as you’ll hear soon, the Fed lends money to foreign central banks and doesn’t know or even care what they do with it. Today the Fed wants to regulate every mom-and-pop shop in the land as well as all the banks and any businesses that it thinks might adversely affect liquidity. It wants higher minimum wages, artificial interest rates and no transparency. It wants to end the problem caused by too much borrowing and spending by employing more borrowing and spending.

Einstein once said, “Don’t expect the people who caused a problem to solve it.” But that’s what the Fed and its wistful, historically illiterate chairman wants us to do.

It’s always my pleasure to introduce one of America’s great defenders of freedom and liberty in Congress and anywhere today, Congressman Ron Paul joins us from our nation’s capital. Congressman Paul, as always, welcome back to Freedom Watch.

Ron Paul: Thank you very much, Judge. Good to be here.

Judge Andrew Napolitano: Thank you. I guess Chairman Bernanke is feeling the heat. I guess he’s really concerned that HR 1207, which will require a public audit of the Fed might actually become law and in an effort to put on a human face and in an effort to show an understanding of our situation, went on public television for 75 minutes to tell us something we already knew. What do you think?

Ron Paul: Well, there are more firsts. First, they hired a lobbyist and I guess she didn’t do too well, so he’s going to be the chief lobbyist and go on PBS and talk about HR 1207. But he may be right, he might not be the one that ushers in another Great Depression, but it will turn out to be the greatest depression ever because I think it’s going to be worldwide. I think it’s going to be a lot worse and I think we’re going to blame him for perpetuating it. We can’t blame him for the crisis that developed last year because that was the previous inflation that Greenspan ushered in.

But the perpetuation of this depression-recession that’s going on now and the deepening of it, we can lay at the doorstep of the Federal Reserve and that will be Bernanke.

Judge Andrew Napolitano: It will be Bernanke. There may be a new chairman, but if there’s a new chairman, the policies will undoubtedly be the same. You wrote a letter this week, Congressman Paul, which was signed by some of your colleagues from across the ideological and political spectrum in the House of Representatives with your concerns about Goldman Sachs and your concerns about its use of federal dollars to enrich itself free from certain regulation and again, below the radar screen. Could you tell us what’s that’s all about?

Ron Paul: Well, we are not to the bottom of things because the Federal Reserve acts independently, which is in secret. They don’t want to reveal and that’s why the auditing bill is so important. But there’s pretty good evidence that he did. I mean, we do know that he did exempt Goldman Sachs from regulations that gave them greater leeway in using government funds and lo and behold, Goldman Sachs is now very profitable again. They survived. Lehman Brothers didn’t. A lot of little people didn’t; a lot of people are losing their houses, so it’s just who gets protection and who gets the pain and the suffering, and it looks like Goldman Sachs and the Fed have been working in collusion and this is targeting one particular incident that is now public knowledge and we’re trying to get him to respond to it. I don’t expect to get a whole lot of response, but I think this is why he’s become tenacious in trying to get the people to come out against it. You know, one thing that they used is they don’t want transparency of what the monetary policy is all about because they have to protect the public’s interest.

Well, you know, the public’s interest, are they not represented by these millions of people who have gotten to their congressman and we have these 277 co-sponsors? Aren’t they part of the public interest? Or is it Goldman Sachs and the big banks that represents the public’s interest. These are all code words that people are supposed to roll over and play dead and say, “Well, we don’t really care. They’re caring about the public’s interest. I guess it’s okay. They’ll take care of us.” But hopefully, we’re changing that attitude.

Judge Andrew Napolitano: Now, the Goldman Sachs issue that you pointed out is particularly troublesome, Congressman Paul, for a number of reasons. One, the treasury secretary at the time that AIG was bailed out was Hank Paulson, a former Goldman Sachs chair. Two, he did this in consultation with Lloyd Blankfein then and still the chair of Goldman Sachs. Three, when the Fed bailed out AIG, actually after the Fed bailed out AIG, we found out that AIG… excuse me, the biggest client of AIG was Goldman Sachs and four, when Lehman Brothers was teetering on the brink and the government decided not to bail them out, lo and behold, Lehman Brothers was Goldman Sachs’ biggest competitor.

Question, don’t we have something in the Constitution called the Equal Protection Clause and isn’t that supposed to require that the government treats similarly situated people and entities in a similar way and not pick and choose who it’s going to save and who it’s going to let die on the vine?

Ron Paul: Well, remember Animal Farm: Everybody is equal, but remember some people are more equal than others. Now, Goldman Sachs happens to be more equal than anybody else. But the big thing is that the American people are catching on. This is not being missed by the American people, so I’m feeling encouraged that it’s getting some attention, but we still have a long way because they are tenacious and the fact that they’re putting Bernanke out on the stump means that they are very concerned.

But ultimately, their system fails because it’s based on fraud. It’s based on a monetary system that won’t work. It’s just a matter of, can we put it together enough to get enough people to understand what we have to do to put this back together? We do have the founders’ advice in our Constitution; I tell people that we’ve gotten into this trouble because we didn’t follow Article 1 Section 8, and if we did follow the precise limitations of government power, even now we could use that as the guide to get back […] and so I’m encouraged that more people are thinking that way, but not here in Washington because I still don’t have them reading the Constitution here yet.

Judge Andrew Napolitano: Well, you’re getting there. Two of your colleagues gave me a little bit of hope this week. Congressman Dennis Kucinich was on my radio show, Brian and the Judge, during the course of which he said absolutely wonderful things about you and your understanding of the Federal Reserve and the free market. It was nothing new to me and our listeners, but it was nice to hear it coming from the lips of a liberal Democrat, but he also said he’s convinced HR 1207 will pass the House and eventually pass the Senate. If he’s right, of course, that’s great news. The other interesting thing this week that I saw came from another Democrat, your Congressman Alan Grayson interrogating Chairman Bernanke and getting him to admit that they have loaned huge amounts of money to foreign central banks. He didn’t know how much. He wouldn’t say what banks and he had no idea what those foreign central banks did with the money to which the American Federal Reserve loaned them. Does any of that surprise you?

Ron Paul: No, it doesn’t surprise me, but I’m delighted with this shift in attitude because it’s good to have somebody like Dennis on our side. You know, I’ve worked hard with him on foreign policy and the wars that are going on and he is independent-minded and will stand up against his party and Alan Grayson is a freshman, he’s very determined and very bright and he does ask these very good questions.

But it used to be that I would ask these questions for a few years, you know, a dozen or two or a lot more and it would be totally ignored, but now, you know, even Bill Posey the other day followed up and had some good questions with Bernanke. So I’m not totally alone anymore and it’s bipartisan because this issue of transparency and honesty and openness is a bipartisan issue. We don’t have an entire agreement on exactly what we’ll do afterwards, but we are agreeing that the American people deserve to know what’s going on and if there are shenanigans and even in the Senate’s side, you know, Bernie Sanders who calls himself a Socialist, he’s with us on this issue because he sees that it subsidizes big corporations, and even a good socialist doesn’t like to see Goldman Sachs being bailed out. So when we can find allies like that, we should work with them and bring the truth to light.

Judge Andrew Napolitano: Before I let you go. Prediction, will HR 1207, your monumental bill, which started out with just you and now has 277 co-sponsors, pass the House and eventually make its way into the Senate floor?

Ron Paul: Not as an isolated bill. I don’t predict that because Pelosi, I don’t think would permit that to come up. Barney Frank is not in favor of that or they would have had it already up, but that doesn’t mean that the bill or the thrust of the bill might not be incorporated into something else and I think the biggest job I have is to make sure if they put it into something else because I think they’re feeling the political heat and they know they have to do something, but my job is to make sure that it doesn’t get watered down, so that in essence, 1207 does get passed, even though it won’t be passed as an isolated bill.

Judge Andrew Napolitano: Congressman Paul, it’s always a pleasure. Thank you very much. Until next week on Freedom Watch. Thanks for joining us.

Ron Paul: Thank you. All right. Thank you.


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  • Fed Prod

    Schiff and Schiff – any relation to Schiff?

    • christine

      Glad you asked. I was thinking the same thing. This recycling within a small number of families is getting us into trouble and it’s getting old. This bloodline thing has got to go! Their blood is full of psychopathic ideas for America and Americans, and the world for that matter. We need fresh, freedom-minded, constitutional republic-minded, common, ordinary folks like ourselves to rise up our of the blue and take leadership, those who have no ties to the elite whatsoever!!

    • longshotlouie

      Wrong Schiff

      I believe Peter is the son of the infamous Irwin Schiff who testified before the Senate Committee on Banking and Currency in opposition to the removal of gold backing from Federal Reserve Notes in 1968.

      He then started his tax protest and was imprisoned.

      He was also in the ‘Freedom to Fascism’ movie.

  • longshotlouie

    Geithner Warns Regulators to Back Reform Plan

    • Christine

      Something will cause the FEDs downfall, and this whole malarky the world has been going through for so long, for a few arrogant rich kids grown up who have this Marvel Comic idea stuck in their warped minds of controlling the world. It would be so nice if they just imploded from battles within their tight little secret group. It would save a all a lot of trouble. The word “turf” in the article reminded me of neighborhood gangs, appropriate, just bigger turfs.

  • longshotlouie
  • VR
  • DanielL

    Judge Napolitano interviewed Pro.Walter Bock interesting what his opinion is on with auditing the federal reserve corp? also his opinion with applying constitutional gold back money system.

  • longshotlouie

    They’re Yelling in Austin !!

  • In my Tract The Age of Turbulence: Plea for a New World Economic Order, I explain the nature and causes of economic depressions.

    It proves that the ominous fate of this economy is Keynes’ Liquidity Trap.

    Its consequences are a new, bigger Crash causing, this time, a real Great Depression II.

    A turbulence in fluid mechanic is a chaotic state of a liquid. It Owns Most of the Proprieties of The Liquidity Trap, Origin of The Crash.

    Preparing for the Crash, The Age of Turbulence. Proposes a way to profit from The Crash.

    Using the yield curve as a predictor that strategy covers Treasuries, Corporate Bonds, Minerals (Oil, Precious Metals and Base Metals.) and Stocks.

    Its aim is to profit from both the Asset Price Bubble and Irrational Exuberance and The Crash and Economic Depression that will necessarily ensue.

    It tries, and for the time being very profitably, to accomplish Alan Greenspan Mission Impossible:

    “That is mission impossible. Indeed, the international financial community has made numerous efforts in recent years to establish such oversight, but none prevented or ameliorated the crisis that began last summer.

    Much as we might wish otherwise, policy makers cannot reliably anticipate financial or economic shocks or the consequences of economic imbalances.

    Financial crises are characterised by discontinuous breaks in market pricing the timing of which by definition must be unanticipated – if people see them coming, then the markets arbitrage them away.”


    The clear evidence of underpricing of risk did not prod private sector risk management to tighten the reins.

    In retrospect, it appears that the most market-savvy managers, although conscious that they were taking extraordinary risks, succumbed to the concern that unless they continued to “get up and dance”, as ex-Citigroup CEO Chuck Prince memorably put it, they would irretrievably lose market share.

    Instead, they gambled that they could keep adding to their risky positions and still sell them out before the deluge. Most were wrong.”

    Alan Greenspan
    The Age of Turbulence: Adventures in a New World [Economic Order?].

    I propose a plausible alternative solution to the depression: I designed a System that will allow us, when The Crash will come, to get out of Credit Based Free Market Economy, Capitalism, and transfer to my Adjusted Credit Free, Free Market Economy and Abolish the FED:

    To participate in our new economy you need to ¥€$ Enter Your €5 in The Cra$h R€gi$t€r. Before The Crash.

    “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

    It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice.

    But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

    A regulation which obliges all those of the same trade in a particular town to enter their names and places of abode in a public register, facilitates such assemblies. It connects individuals who might never otherwise be known to one another, and gives every man of the trade a direction where to find every other man of it.

    A regulation which enables those of the same trade to tax themselves in order to provide for their poor, their sick, their widows and orphans, by giving them a common interest to manage, renders such assemblies necessary.”

    Adam Smith
    June 5th, 1723 – July 17tn, 1790
    An Inquiry Into the Nature and Causes of the Wealth of Nations.
    Inequalities Occasioned by the Policy of Europe.
    March 9th, 1776

    Buy Now The Tract That Will Be Published September 17th, 2009.

  • Simus

    Lots of things are based on fraud. Try auditing William Faulkner:

  • Ross

    I did some maths on Ron Paul’s stats that the US $1.00 of today is now equivalent to 4 cents of 1913 when the Fed originated.To depreciate a currency by half you have to double the money supply.

    Since 1913 the US $ has depeciated by a factor or 25 times or 2500%.Divide 2500% by the 96 yrs since the Fed started and you get an average increase in money supply of 26%,but the average inflation rate for this period is only 3.4%.It just didn’t seem to make sense until I realised that inflation like interest is If you have and inflation rate if 10% on a $1.00 the new money supply is $1.10.On the 2nd yr it is $1.10 X 10% or 11 cents.So the new money supply is $1.10 + 11c or $1.21.

    With a smaller rate of inflation of 3.4% it takes longer for the multiplier to have a serious effect. Using the compound interest formula at 70yrs the amount of inflation is 10 times the original $1.00 you started with or $10.00 + 1.00 = $11.00.At 96 yrs or today it is 25 times the original $1.00 you started with.So now we begin to see the expodential growth of inflation and this is why mathematically a collapse had to happen even with a small inflation number.The Fed has made trillions of $ creating this monopoly money at the expense of the US worker.

    The Fed must have known this,since this is all they do.They have failed their most basic charter,ie of regulating the money supply. They are either totally incompetant or totally corrupt.

    Why does Obama want to give the foxes the keys to the henhouse?

  • Lancelot

    I say we audit the fed right after we as a people rise as one and slay the beast brick by brick. Then after the dust has settled we should investigate the damage they have done. Never in my life have i been robbed but when i watch prices rise i feel as if im being mugged of my labor. I work my hardest for about 50 hrs a week and i watch day by day as my hard earned money purchases less and less. One day the people will get tired of waiting for bills being passed, one day the people will be tired of turning their other cheek, one day the fed will end, whether by the wrath of a mob or by the peaceful way of legislation this fed is going to end.