Judge Andrew Napolitano: Hello and welcome to Freedom Watch, your daily dose of raw liberty streaming online at www.FoxNews.com. I’m your host Judge Andrew Napolitano, here defending freedom, defending your natural rights and defending your right to have a government that stays within the confines of the Constitution.
The recently released New York Fed / AIG emails reveal a conspiracy among the lawyers for AIG and the New York Federal Reserve, to conceal from the Securities and Exchange Commission the true nature and extent of AIG’s indebtedness and its intention to pay certain vendors, among them Goldman Sachs, 100 cents on the dollar.
It is a federal crime to leave out material information involved in a loan from a federally insured bank. And this wasn’t your ordinary loan, this was a case involving the movement of nearly 185 billion dollars among the treasury, the New York Fed, J.P. Morgan Chase and AIG. Leaving out the name, the amount, and the intended payment to a creditor of 13 billion dollars, would surely satisfy the material misrepresentation requirement of the statue that criminalizes such omissions.
The fact that “The government told me to do it” is not only not a defense at law, but may and should implicate whoever in the government counseled in favor of such omissions.
Though we do not know, and I have not seen any evidence of, any personal knowledge of any of this by the then senior official at the New York Fed, current treasury secretary, Timothy Geithner, it is difficult to believe that he would not have known of any of this.
The following is clear: it’s clear that senior personnel in the legal department of the New York Fed did know of it. Now the lawyers would no doubt say in their own defense – they were the bank’s lawyers. They and the bank knew of AIG’s intentions with respect to Goldman Sachs. And thus that fact did not have to be reduced to writing since the Fed knew well where its money was going, there was no harm and, thus, no foul.
Unfortunately for the Fed’s lawyers and AIG’s lawyers and executives, the sneaky revelation through word of mouth of that which the law requires to be stated in writing, does not fulfill the requirements of the law.
Could it be that the single largest federal bailout in history was procured by fraud? Fraud in which the feds themselves participated, and the government actually counseled in favor of criminal behavior? Only in America.
It is now my pleasure to introduce one of America’s great defenders of freedom today. Congressman Ron Paul joins us from our national’s capital. Congressman, a belated Happy New Year and welcome back to Freedom Watch.
Ron Paul: Thank you.
Judge Andrew Napolitano: Should Tim Geithner be fired whether he knew or even if he didn’t know what lawyers in his name were telling lawyers at AIG to do in a 185 billion dollar deal?
Ron Paul: Yeah, I think he’s earned that. I think anybody who’s trying to act responsibly and have a clean slate, he would have to go. You imply that probably fraud was involved in this operation. But I think that’s a narrow definition of fraud, and the broad definition of fraud is the whole process; the whole system of money is fraud. You know, it’s a cartel with fiat money and they’re always taking care of their friends.
But you know, I put out a little release after this happened. I didn’t concentrate on Geithner, and I think he is important and even if he didn’t know anything about it, to me it seems like he’s irresponsible. He should have known something about it. But my point that I made was, this makes the issue of transparency of the Fed very, very important. And then they yell and scream that we’re not supposed to know. So as bad as the Fed is and what they’ve done, you know, I blame the Congress still the most because it’s we here in the Congress that have the responsibility. The Congress in the past has created this system, and now even this generalized concept of fraud turns into a narrow system of fraud. And the Congress, you know, they’re going to tinker and yell and scream and all. But Congress has a lot responsibility for the mess that we’re in today.
Judge Andrew Napolitano: You know, I thought of you yesterday, Congressman Paul, when we first learnt of this story. And I thought to myself: “My goodness, here is another argument in favor of auditing the Fed. Think of the attitude on the part of these Fed lawyers. Let’s see, we’re talking about September 2008. The present secretary of the treasury is the former chair of Goldman Sachs. You guys are going to take the money we’re giving to you and you’re going to pay Goldman Sachs 100 cents on the dollar, and you’re not going to pay anybody else 100 cents on the dollar. Maybe we shouldn’t put that in writing. Think of the problems that come about when the government breaks its own laws.”
Ron Paul: Judge, you think this could qualify as the big lie? It’s so preposterous, nobody would believe this is conceivable, but they would allow this to happen. But this is a big lie, you know, when you think of what we do and reward Goldman Sachs and all the banks, and they’re still back in business. They’re making a lot of money and we’re still guaranteeing this money to them through the FDIC and other assurance programs that are available. So we haven’t really done anything yet.
And this commission that’s in operation down here right now to investigate is another commission that won’t accomplish anything. They do not have one free market economist that is on the commission. They probably won’t have anybody testify from an Austrian free market viewpoint, and they’re going to find the answer to this? The very economists who predicted this mess and know what was going on, you know, they understand it, but they’re not going to touch this. They’re going to talk about tinkering around with regulations. If we have a few more regulations, like Sarbanes-Oxley, and chase good companies overseas, that’s the only thing that’s likely to happen because they’re not even talking about the real problem; the fraud in the monetary system.
Judge Andrew Napolitano: Congressman Paul, just think of what we’ve learnt since TARP. Remember when Henry Paulson and Ben Bernanke went rushing in to President Bush with some notes written, almost literally, on the back of a napkin, saying, “You’ve got to get us this 800 billion dollars or the sky is going to fall”. We now know that there was likely fraud in the AIG deal. We know that they didn’t spend the TARP money on what they were going to spend it on. We know that the banks that they’ve bailed out have all paid it back. We know that the banks have become wealthier with federal dollars, we know that some of the banks didn’t want, didn’t need, couldn’t use, and tried to resist the federal money, and there are people in the Congress who are still saying that the Fed has the right to keep its behavior secret from the rest of us. Can they even, with a straight face, make that argument anymore?
Ron Paul: Well, they’ll try to and people seem to gobble it up. But when you think that the leadership of both parties endorse this – remember when the vote came up on that, our two candidates – Republican and Democrat – they rushed back and they both voted for this. So, you know, the whole system, whether it’s the Federal Reserve System and the excessive spending, there is a little bit of talk but no real action. So it’s a shame. This is why I am pessimistic in the short run believing that nothing is going to be changed on here. The deficits and the spending will not come under control, but hopefully our message of freedom and liberty and sound money will get out because it’s growing by leaps and bounds, that we can at least offer the answer when we have a currency crisis. And that’s going to be the most important thing, that when we have to rebuild this system, we rebuild it with some common sense rather than this fraudulent system that just encourages the benefits to all these special interests.
Judge Andrew Napolitano: One of the most important pieces of legislation to Freedom Watch viewers is yours to audit the Fed. What is your feeling, optimistic or pessimistic, that at some time in 2010, in some form, it will reach the president’s desk? What do you think?
Ron Paul: Well, if it reaches his desk in some form, it will probably be watered down a good bit. To have it reach his desk the way it is now, I believe it’s such an important issue to the leaders of the country, the president, and Wall Street and others. I think it would be stopped because they’re not going to allow this to happen. There are too many things. I mean, this Goldman Sachs deal is just the tip of the iceberg. I imagine there are hundreds of deals like this and they’ve been going on for 30 years or more. So there is so much buried in there and they’re not likely to let this happen. That’s like finding out every single thing the CIA has ever done over the last 30 years.
Judge Andrew Napolitano: Well, this week there was an argument in Federal Court here in New York City in which the Fox Business Network sued the Federal Reserve under the Freedom of Information Act to get a copy of all the documents in TARP. And I went through the oral argument; there were a number of people involved that were friends and colleagues of mine. And the government actually argued that if we reveal today in 2010 the nature of the TARP documents that we saw and dealt with in 2008, it would harm the banks. Harm the banks? The money has already been paid back. The banks have made a fortune, the banks are paying themselves billions in profits and in bonuses. What kind of an argument is that?
Bottom line, Congressman Paul, I think Fox is going to win. I think the second court of appeals is going to grant that Freedom of Information Act request. It will go all the way to the Supreme Court, but I think we win this round. And that will help your Audit the Fed bill to pass.
Ron Paul: Yeah. But this is a good example of the citizens acting any way they can, because they can’t wait on Congress. I’ve been working at this for a long time and we are making inroads. But because of the suits and what Fox has done has been very beneficial. So everybody has to get together, but because of the attention that Fox got from this lawsuit, I think it has helped us a whole lot. It is lot more difficult for anybody in the Congress to vote against. I think if there is an up and down vote in the Senate, they’ll do what they did in the House. They’re going to vote for this. And I hope that happens, I hope I’m not too pessimistic. There is a chance that would happen. I think what might happen is they’d allow it go through and then they’ll depend on the courts to protect them.
Judge Andrew Napolitano: Right.
Ron Paul: You know the history rather well; the courts have not been good at protecting sound money and they’ve always protected the monopoly of the Federal Reserve and central banking.
Judge Andrew Napolitano: Unfortunately youré right but I’m glad to hear your optimism in this brand new year that we’re in right now. Before I let you go, the president announced this morning – not directly but through somebody else – that he’s going to ask for another 40 billion dollars to pay for the troops in Afghanistan. Where is the outrage on the left of his own party to a) the concept of an unlawful war, and b) funding the war like George W. Bush did, on a credit card?
Ron Paul: And then they wonder why there might be some pressure coming on our dollar. We’re already under pressure, but it’s going to get a lot worse. You know, you just can’t imagine where their thinking is. I’m always baffled with that. But they do it with a straight face, as you say. They just come back and say, “Well, this is 30, 40 billion dollars. You know, what’s the difference? We’re already a trillion dollars in deficit this year, so a little bit more won’t hurt”.
But they always will qualify and say, “We’ll worry about the deficit later on. We’ll worry about inflation later on. But right now there is a crisis and we have to act, or the world will come to an end”. Of course, we’re in a financial crisis because we’ve been acting this way all along.
Judge Andrew Napolitano: One more question about abortion, Congressman Paul. Congressman Bart Stupak, the pro-life Democrat who leads a large group of pro-life Democrats in the House insisting on language in the federal healthcare legislation that would prohibit the government from directly or indirectly paying for abortion, said that if the Senate version comes to the House, the pro-life Democrats will vote against it. Do you think that’s so? Do you think the issue of abortion, of all things, could possibly save us from the socialization of medicine in this country?
Ron Paul: Wouldn’t that be a wonderful irony for today if that issue was able to wake some people up? So people would be voting our way for different reasons, but for a very important reason. And that’s a possibility. I think when push comes to shove, he won’t be able to hold all those votes. But the question is I think he needs at least 40. But he had about 60 before, so he will have to keep a bunch of Democrats with him and that’s an interesting phenomenon. So it may just turn out that the right to life issue gave us right to maybe our free market medical care. At least move us in that direction away from socializing our medical care.
Judge Andrew Napolitano: So nicely put. Congressman Ron Paul, always a pleasure. Thanks for joining us.
Ron Paul: Thank you.