Show: CNN American Morning
Host: Kiran Chetry
Kiran Chetry: It was one year ago when the world’s financial markets were stunned by the collapse of Lehman Brothers. The failure of a top U.S. investment bank panicked investors and scared the Federal Reserve into action. Fearing a domino effect, it became more than 700 billion dollars of an effort to help save Wall Street and by extension, Main Street. Well, in our “Banks Gone Bust” series this week we’re looking at the U.S. economy and the rescue effort one year later. Should we have bailed out those banks, and is the economy recovering, and is there enough regulation, or any regulation in place to prevent it from happening again?
Joining me now to help answer those questions is Representative Ron Paul of Texas. Congressman Paul also wrote a new book, “End The Fed”. Thanks for being with us this morning, Ron Paul. Congressman Paul, we know you that you have long felt that the Federal Reserve was not an organization that did any good. You felt that they had unchecked powers. As we take a look, many are hailing the Fed as the hero out of this thing saying that if it weren’t for the Fed we’d be in a great depression after what happened one year ago with the collapse of Lehman. What do you think?
Ron Paul: Well, I think the Fed has done a wonderful job for Wall Street, but you know, the people, the average guy lost a lot of money. They come in with more credit and pump it up and bail out all the big guys and getting all these bonuses for these individuals who should have failed. And they claim there is a recovery. But the recovery ought to be measured by people working. You know, true unemployment now is at 16% and the people who lost money have not regained their money, people who have lost their houses have not gotten their houses back. So there is no recovery; all there is is a lot of fudging. And I do agree that we do need a lot more regulation, but we need regulation of the Federal Reserve because that’s the source of the problem. They create the easy credit, they create the bubbles. And we need enforcement of contract law. We need enforcement that when you do something dumb, you ought to go bankrupt. And we out to have anti-fraud law. We shouldn’t protect these people, we protected them all the time.
Kiran Chetry: Let me ask you about this because this is interesting. We’ve been doing a series all week named “Banks Gone Bust” which is about how we got here and what the answers are. We just heard from Alan Turner, in the proposals that were given from Treasury to Congress, apparently two months ago for Congress tp look over, it calls for in this regulatory overhaul to give the Federal Reserve more power over big financial firms.
Ron Paul: This is unbelievable, but it’s typical Washington politics. You know, somebody messes the system up. You know, the Fed is supposed to have full employment and at the same time stable prices and a good dollar. They destroyed 97% of the [value of the] dollar, we have a 16% unemployment rate, they bring on this financial crisis and bailout all their buddies and the little people keep suffering. So what do we do? We want to give more power to the Federal Reserve? It makes no sense whatsoever. So I don’t see how we’re going to solve this problem.
Kiran Chetry: Okay, let me play devil’s advocate then. Who is to be trusted less, going from your point of view? They’re talking about the Fed having power to regulate some of these financial institutions that most economists we talked to say are still doing the exact same thing. They’re just finding another way to do it. All the risky moves that ended up bringing us down or bringing down some of these big firms a year ago – it’s still happening. Nothing has changed. So what’s the answer?
Ron Paul: Well, the answer is “End the Fed”. The Fed is the culprit, they’re the ones who destroy the money and manipulate the economy and have central economic planning. The people who love war love the Fed because they finance the war. The people who love welfare love the Fed because they monetize that debt. So if you want to stop this, you have to look at the Fed and find out what they’re doing. They will not tell us who they bailout, who their friends are, and the trillions of dollars that they’re involved in. They’re bigger than the Congress, they have more power than the Congress. The Fed chairman probably is more powerful than our President. And yet we refuse to look at it. Fortunately though, our Congress is getting more in the mood to look at the Federal Reserve. We do need to find out what they do and where these benefits go. And they’ve been doing it for years, but the time has come for us to look at the Fed and find out that the market can work, sound money is mandated in the Constitution, not the central bank. Regulations by bureaucrats cannot compensate for all the harm and evil that the Federal Reserve does. And that’s what they’re trying to do. They’re trying to regulate something that shouldn’t even exist.
Kiran Chetry: Alright, one of the other things that you mentioned twice and people are probably going to be wondering why you said unemployment is actually at 16%. Because when we get the labor statistics it’s hovering around 9.7%. But you’re also counting in many others due as they take a look at this people who have simply given up. They’ve decided to either take early retirement or they’re no longer actively pursuing a job because they feel that they can’t. As we look at that situation, retail sales are also a big indicator of whether or not things are turning around. We see the uptick in the stock market and we see that things have been going really well on Wall Street. We haven’t seen some of those others indicators changing and people talk about perhaps the problem with getting into a double-dip recession, meaning we seem to recover and then we drop back down again. What are some of the solutions to that?
Ron Paul: Well, I don’t think we seem to be recovering. I mean there are more people unemployed all the time. So the solution is that we have to liquidate debt and we don’t permit it. All the bad debt and malinvestment were bought out by the taxpayer and transferred to the treasury and Federal Reserve. What you want to do is get rid of the debt. You either have to pay it off or liquidate it. And we’re doing everything wrong. We’re doing exactly what we did in the Depression, we’re doing exactly what the Japanese did in the 1990s, and they prop up the bad investments. So you want to liquidate the debt. You don’t want the consumer to spend more money. The consumer should spend less and save money and go back to work and pay down the debt and go back to work. And then the recession could have been over in a year. But no, when you prop up bad debt and prop up these prices and all the mistakes that we made, this prolongs the agony. And this is exactly what we’re doing. We had this year and a half or so of this pumping of these trillions of dollars, and there have been no good results. So I see no good outcome from the policies that we have.
We ought to believe in sound money, free markets and getting the government out of the way, but into enforcing the laws of the market. If you’re doing a bad job you should go bankrupt and you should be liquidated, instead of propping up all the bad companies. We shouldn’t permit somebody like Goldman Sachs to come our here. They’re the ones who came out, and believe it or not, they have a lot of influence in our treasury and a lot of influence in our Federal Reserve.
Kiran Chetry: Alright, well your new book “End the Fed” is out. By the way, are you going to send a copy to Ben Bernanke?
Ron Paul: Oh yes, because his name happens to be in that book. I think I would like to get a comment from him.
Kiran Chetry: Alright. It was good to talk to you this morning. Congressman Ron Paul, thanks.