Channel: Fox Business
David Asman: They bow their heads, and after getting slapped, they looked up sheepishly and asked, “Please, sir, can I have another?” Now, others did stand their ground. But what was the purpose of this show trial? Was it really to get to the root of the financial crisis, or was it to deflect blame to the easy targets while setting the stage for yet another tax increase?
After all the bankers, we’re just taking advantage of some dumb fiscal regulatory and monetary policies that government officials have been putting in place for decades. The bankers were taking advantage of a bad situation. For that they’ve been pillaried and paraded through the press the way capitalist voters were force-marched with dunce caps by Mao’s red guards during the Cultural Revolution.
Of course, many bankers were shortsighted. Like the rest of us, they just kept overextending during the boom cycle. And in some cases there was actual double dealing. Some banks recommended bad financial instruments that were being shorted by another division of the same bank. That’s bad, it’s possibly illegal and it should be exposed.
But aren’t we blaming the wrong people for the cause of the crisis? The right people to blame are folks like Alan Greenspan who left interest rates too low for too long because he believed a nation homeowners would be good for the economy at any price. Folks like Chris Dodd who are taking favors from sub-prime lenders while rewarding those lenders with billions of your tax dollars in legislation. Folks like Barney Frank who spat at anybody who was worried about Fannie and Freddie getting billions of dollars over their heads with these lousy sub-prime loans, folks like Tim Geithner who got us in so far over our heads with AIG’s bailout, that he now may be losing his job over it.
In short, the real culprits in this mess are the politicians and the bureaucrats who let the good times roll without any consideration of the consequences of bloated government and easy money.
So, are we blaming the wrong people? Let’s ask Republican Congressman Ron Paul, who joins us now from his home I believe. Good to see you, Congressman, thanks for being here.
Ron Paul: Thank you, David.
David Asman: So are we blaming the wrong people when we focus on all the attention on the bankers?
Ron Paul: If you do only the bankers and include all the bankers, yes. Some bankers know exactly what they’re been doing and they’ve been benefiting from the easy money system, and they were wildly speculating and making a lot of money. But they were also encouraged by the moral hazard of FDIC and “too big to fail” and they knew what they were doing. So they were acting in a logical way. But the real culprit that I’ve been talking about for so long has been easy money too long, and that is low interest rates, the false signals of a lot of savings out there and you should be investing and that, of course, isn’t looked at.
David Asman: It started with the Fed and Alan Greenspan?
Ron Paul: Well, even before that. I base our modern calamity in our financial situation from 1971 when all the restraints were removed from creating currency out of thin air. And that is the reason you have your deficits – because of the lack of the tying of our dollar to anything other than paper.
David Asman: Let me just be specific for the folks out there that might not remember. 1971 is when Nixon separated the dollar from gold.
Ron Paul: Yes, and this introduced an era where Congress could run up deficits for any reason, whether it’s for policing the world or for the welfare state, and at the same time accommodating the financial situation too; the financial organizations knew about this, too. So the Fed had to monetize the deficit. If you don’t have a central bank that monetizes the debt, you put a lot of restraints on big government. Anybody that thinks government should be smaller and held in check, they have to believe in sound money, because it’s with the Federal Reserve System and the ability to create this money and the following corruption and the malinvestment and the financial bubbles and the bailouts. It’s all a consequence.
But if you do concentrate on a narrow group of bankers and say they created the whole problem without looking at legislation and without looking at the Federal Reserve and without looking at all the regulations that are a burden as well, then you’re really missing the boat.
David Asman: Alright, let’s talk about some individuals here: Barney Frank and other congressmen and senators who supported Fannie and Freddie getting way in over their head on the sub-prime loans. That had a lot to do with this as well, didn’t it?
Ron Paul: Oh yeah. I think this line of credit to the treasury was only 2 billion dollars, but I always said that when push comes to shove, the Fed will end up owning these derivatives and these securities. But I had legislation in 8, 10 years ago that said, “Remove the line of credit, remove this guarantee that the Fed would always step in”. Because if the Fed had not stepped in, you would have had the dollar crisis which has just been delayed, because too many around the world, for example the Chinese, are owning all these and if they literally collapse you would have had a bigger calamity. But all we have done is delayed the monetary crisis because we have allowed our Federal Reserve to buy up all these securities. But that was part of the system of Fannie Mae and Freddie Mac and propping them up and guaranteeing that everybody can get a loan, no down payments, 125% as equity, the whole mess. When this history is written, it will be unbelievable.
David Asman: Unbelievable. And frankly, congressman, what I would call out-and-out bribes. I mean, when you had Chris Dodd, who was the head of the banking committee writing legislation that benefited people that he was getting sweetheart deals from to the tune of 300 billion dollars in that housing bill. I would call that criminal behavior, wouldn’t you?
Ron Paul: Yeah, this is fraud in the individual sense and it should be punished and it should be looked into.
David Asman: Well, it was looked into and of course it was whitewashed, Congressman. That was the problem.
Ron Paul: Yeah, but also, the fraud is in the money. I mean, it’s fraudulent to steal from the people by diluting the value of the money. Debasing the currency is the big fraud which destroys the economy and takes away the jobs and puts the burden of inflation on the little people.
The one thing that they never talk about is our medical care system is in a crisis because it costs too much. Well, it costs too much because there is an inflationary factor. That isn’t even discussed. So everybody is cheated when you have fraud in the monetary system. But the individual fraud – how people take advantage of this and adds on to it and then there is corruption involved. Yes, but that to me is probably much smaller than the fraud of the monetary system and what we’ve been living with.
David Asman: But I have to ask you about Tim Geithner, because of course, he’s in the news. He’s going to have to answer questions before Congress. Do you think he deserves to go, based on what we’re now finding out about his role in AIG?
Ron Paul: Yeah. And he deserves to go but I warn people that’s not going to solve all our problems. They’ll replace somebody that believes in the same things that he believes in. The point that I made with the Geithner affair is that it makes my point: transparency of the Federal Reserve. We should know about all those deals, and if they knew we were going to know about all those deals, they wouldn’t be making so many and getting into so many problems.
David Asman: Well, you know we support you on the transparency issue. We actually support you in court on that. Ron Paul, great to see you, thanks for being here, appreciate it.
Ron Paul: Thank you, David.