Show: American Morning
Kiran Chetry: It’s a mix that is hard to figure out for many Americans with an unemployment rate of nearly 10% put in the Wall Street Journal, the nation’s top 23 banks and investment firms are poised to pay a record 140 billion dollars in bonuses to their top executives. And many of those banks got bail out money. Some of them were able to paid back, of course, leaving many to wonder if they’re on a road to repeat their past mistakes. Joining me now from Clute, Texas is representative Ron Paul of Texas and the author of “End The Fed”. Great to see you this morning.
Ron Paul: Thank you, nice to be with you.
Kiran Chetry: Congressman, it just seems like yesterday that we were talking about these firms on the brink of collapse, and we poured in a record amount of tax payer money into rescuing these firms in the form of that bailout. And now we’re talking record profits, and at the same time we’re not seeing that same wealth trickle out to Main Street. So what’s going on?
Ron Paul: Well, they take care of their own. There is a great deal of influence in Washington from Wall Street. And I think most people have known about it, but they’re really coming to the understanding how it really works. If things are going well when the bubble is being formed and the Fed makes easy credit, a lot of people make a lot of money. But that’s doomed to fail. The bubble bursts. And rightfully, the thing to do then is to put people in jail if they committed fraud. And the people who are bankrupt, let them go bankrupt.
Well, we didn’t do that. Very little fraud was prosecuted and the people who were supposed to go bankrupt got bailed out. Some went bankrupt if they didn’t have influence, like Lehman Brothers, they went bankrupt. But some like Goldman Sachs are in a much better position. So they’ve already got the bailout and they’re making tons of money. So it’s the system that is so bad.
Kiran Chetry: Well, you were against the bailout in the first place. You were somebody who said you wanted the chips to fall as they may and there were very convincing arguments on the opposite side that if we let this happen, this might be something from which we might not recover. Is this how you expected things to be a year later after the bailout; record profits for some of the top banks?
Ron Paul: Well, I wouldn’t be able to predict and say what he profits would be. But no, I’m not surprised there has been a recovery. I think markets work this way. The stock market has recovered 50%. A lot of times that has happened. That happened in the 1930s. So these same banks right now that are making tons of money and stacking it away are not out of the woods when the next downturn occurs.
So, I don’t think it’s over. But we have to wonder who is pulling the strings. It is said that the Congress didn’t have enough strings attached to the money they were giving away. But I think the strings go in the other direction. I think Wall Street has the strings on Washington and they pull and do what they want and that’s where the corruption is. They control the monetary system. That’s why it is so important that we find out how he Fed deals with banks secretly and how they deal with international finances and international central banks and other governments. That’s where a lot of shenanigans are going on. They’re hysterical if they think the Congress is going to find out exactly what they do behind the scenes, and why some of these companies and some of these banks, you know, do so well while the average guy on Main Street gets clobbered. This is characteristic of the monetary system we have, this is not a surprise.
Kiran Chetry: In the past you have been against regulation, you’ve been a libertarian free market person who thinks that really you got to let business go where it goes. In this situation, though, there were no strings attached, and as we understand, there was a big lobbying effort underway to water down any future regulations. Is this an example where, maybe, we do need some regulations? Because it doesn’t look like, in some of these instances, big business is going to police itself.
Ron Paul: Regulations have to be on the cause of the problem. The cause of the problem is easy credit, so the regulation has to be on the Federal Reserve. Then if things get out of whack, they are still regulations, not like there wouldn’t be any regulations. But the regulations come in a different manner; they come through bankruptcy. We didn’t permit the bankruptcies, we did the bailing out. We perpetuated the problem by inflating the currency and bailing out the people that were benefiting.
So fraud is a very significant problem the government should be involved in; you should deal with that. But the government is committing the fraud when they create this money and deal with their special interests; it’s a fraudulent monetary system. They run a counterfeiting operating. So yes, the regulations have to be there, but we can’t allow the central bank to create the bubble and say that it is unstable and we can prevent the problems by regulations. I think it’s all twisted. The regulations have to come first by preventing… pardon me?
Kiran Chetry: I was just going to say one of the regulations that has been tossed around out there is whether or not we need to have some sort of cap on executive compensation or taxes on executive compensation to limit it. You were against taxing it when the whole AIG bonus debacle was happening. What do you think now? Is it acceptable to you that there are billions and billions of dollars in bonuses being set aside for executives?
Ron Paul: Yeah, this is a terrible position for me to be in, because if it’s taxpayer’s money we have a responsibility that we should be restrict it. Huge benefits for General Motors would be criminal because it is the taxpayer’s money.
At the same time, now it is a mixed deal. They get our money, they return it, they claim they are private and now we’re talking about regulating them. That introduces a whole new problem of the power of government to come in and start having wage and price controls and bonus controls and media controls. Who knows what it is. So it’s very, very bad, that’s why once you embark on a program like this, you get into a lot more trouble. One problem causes two new problems.
That’s why you have to stop it cold, stop inflation and rely on free market principles. But right now there is no easy answer, but the easiest answer I can give is, if it’s government money and they so-called “owe” something, yes we have a responsibility of dealing with that and getting it back in the private sector as quickly as possible, and quit all this bailing out and quit all this inflation, quit all this big government stuff that created this monster, and we could get back on our feet again.
If we wouldn’t have done anything a year ago, yes, there would have been a lot of bankruptcies. But it would be all over now. We’d be going back to work again and people have started saving, and that is very good. But none of this is behind us. All we have done is prolong the agony and very soon people are going to realize that in spite of all these huge profits, Wall Street is still a shaky place to be.
Even though the big guys are going to rip us off and get away with billions of dollars, the system is not going to be revived. We’re not going to revive the dollar reserve standard around the financial markets that has existed for 35 years. We have to devise a new system, and right now we’re only playing games with what we have.
Kiran Chetry: Alright, Congressman Ron Paul, great perspective this morning, thanks for being with us.
Ron Paul: Thank you.