Ron Paul was interviewed on Fox Business’ “America’s Nightly Scoreboard” concerning the government’s involvement in the economy, Fannie and Freddie, and the controversy surrounding Ben Bernanke’s nomination to another term as Fed chairman.
Channel: Fox Business
Show: America’s Nightly Scoreboard
Host: David Asman
David Asman: Here to talk about all these things is one Congressman who’s been warning us all about these houses of cards that were about to fall down, for years. Congressman Ron Paul joins us by phone from Texas, and our own Elizabeth MacDonald is here to guide us through all those weeds of regulations and lamebrain laws the politicians come up with and we’re all subjected to them.
Congressman, first to you. Is this the pot calling the kettle black when we hear all these politicians wagging their fingers about the bad things the bankers have done that got us into this mess?
Ron Paul: I think there is no doubt about it. Especially congressional activity of telling them what kind of loans to make, and making low interest loans and low down payments, the whole works, and these affirmative action type loans. But then again the major part that I talk about so much is the whole process of easy money, you know, I say easy come, easy go. And easy money has been there and it’s been pushed into the banking system. So the banks were participants, but they were more or less participating in a system that was created by the politicians, the monetary system, the financial system, as well as the congressional mandate. It was destined to come down, and it has to come down.
But the tragedy is that the politicians and the same economists are still in charge and they said, “Well yeah, maybe we spent too much, borrowed too much and printed too much. The only thing we know what to do is to do more”. So they’re doubling their efforts, and there’s not a chance in the world that we’re going to have an answer coming out of Washington very soon.
David Asman: Spend too much, borrow much, we’re looking at Ben Bernanke, by the way, who might get thrown under the bus as well. But Elizabeth, the president’s very proud about his roots as a community activist. But one of the prime things a community activist did was try to force banks and get their buddies in Congress to make banks make loans to poor people who probably shouldn’t be in houses, the mortgages of which are driving this whole system bankrupt.
Elizabeth MacDonald: Yeah, you’re right there. Why don’t we have a rent policy until you can afford to own? You know, it’s no small irony that at a time when the president is moving to cap risk at the nation’s bank, that the government has uncapped the credit pipeline that Fannie Mae and Freddie Mac enjoy into the treasury. In other words, they uncapped it. It was at $400 billion, and they just took that cap off. And even Fannie Mae and Freddie Mac in their securities filings say that the nation’s housing policies will cost taxpayers money. They’ve already cost about $110 billion dollars in taxpayer losses. And, you know, the TARP losses, let me talk about that. The banks today have yet to cost money to the TARP. It’s AIG, the auto makers and the home loan modification program that’s costing taxpayers money.
David Asman: Well, because the president’s buddies in the unions essentially own the car companies. But Congressman, you know, when you see the fact that Fannie and Freddie Mae are now… year have Barney Frank saying, “Well, maybe we should get rid of Fannie Mae and Freddie Mac”, after he was the one who prevented them from being auditing, prevented them from getting rid of some of their worst subprime loans when everybody else was telling them to. I mean, that’s the worst hypocrisy here.
Ron Paul: Yeah, and you know, early on I had tried to remove that line of credit. It was a line of credit which was very symbolic because even though they didn’t use it, but the guarantee was there. And it wasn’t $2 billion, they ended up using $400 billion of credit. But the whole principle of the lender of last resort, the government insurance, the FDIC and too big to bail and the line of credit and the guarantees, that’s all built into the system. And there is no attempt to address that. And maybe there will be some improvement, but it’s just back and forth. What we probably need are stricter regulations. We have built in all these mistakes, we expect them to happen, but if we had more regulations you might be able to protect the people from all the mistakes that the banks are doing and are destined to make.
David Asman: Congressman, let me stop you there with the “too big to fail” thing and “a lender of last resort”. The Fed is supposed to be the lender of last resort. Or at least it was for common folks like us how have savings accounts. Our savings accounts were supposed to be backed up by the Federal Reserve. Then when we changed the law, when we got rid of Glass-Steagall, suddenly the Fed was the lender of last resort for gambling houses, for a lot of the Wall Street fast talkers. Is that the where the problem really began?
Ron Paul: Yeah, I know so. I personally, from the belief in the free market, don’t think there should be a restriction against commercial banking, investment banking if you had a truly free system. So when we voted on that in 1999, to repeal Glass-Steagall, I voted against it precisely because it would fall under the guarantee. You know, the FDIC all of a sudden would be protecting these investments. So I was sort of in a mixed deal right there, because I want free market banking and we shouldn’t regulate that. But when you guarantee it by the government, you can’t justify it. I think that’s what Obama was attempting to talk about yesterday.
David Asman: Yes. Well, he was trying to, but a lot of people don’t trust him to work things out. But that’s the point: if you’re going to have free banking then have free banking, don’t rely on the taxpayer or our currency to back up a lot of these loans.
Elizabeth MacDonald: Yeah, that’s right. And the good congressman wrote the book “End the Fed” and he knows full well that the Federal Reserve is about to end its purchases of mortgage backed securities to keep the housing market afloat. That’s a thing on Wall Street that the reason why they uncapped that pipeline Fannie Mae and Freddie Mac enjoyed to the treasury. It’s because of that very reason, because they’re stopping those purchases. They’re going to blow out that balance sheet. Fannie Mae and Freddie Mac agreed to about half of the country’s Gross Domestic Product.
What is astounding in this country is that the government, the Federal Reserve, the treasury, I’ve read the memos and I’ve seen the documents, and also on Wall Street, everybody bet that the housing market would never crash. So it was sort of like we were going to sell each other our inflated houses into our golden years, into our retirement. And one analyst said that’s sort of like betting on selling annuities to each other if you’re on the Titanic. So, you know, that’s the way it was, that was the thinking down in Washington and in Wall Street, and that is stunning.
David Asman: Congressman, I had to ask you about what the Senate is going to do about Ben Bernanke. As you may well know, there are two Democratic senators again who just today said that they had been backing Bernanke, now they’re pulling their backing out of it. Do you think he’s going to survive and get reappointed as chairman of the Fed?
Ron Paul: I always assumed he would, and he may still do it. But I think the bets are getting a little tighter right now. And I think this is good stuff because it draws attention to the organization, the regulators, the banking system, the central bank, as the culprit. And I think that is good. Ben Bernanke himself, you know, I always make the point that he personally isn’t the one that created all this. It’s the system; it was the Alan Greenspans of the world. The system has been around actually for 35 years when we’ve had no linkage to gold, when they just unleashed all of this credit. But, I think it’s very, very good. I think because it intertwined with this was the Audit the Fed bill, because a couple of senators put a hold on his reappointment until they deal with auditing the Fed. So I think this is very, very good. But there is a long fight yet to go in the Senate, so it’s going to be a month or so, I guess, before we knew about this. Transparency is a great […]
David Asman: It’s good that the American public is now becoming more aware of something that is so important to all of our lives, most of which was going on without anybody noticing. We’re going to leave it at that, Congressman Ron Paul, good to have you. Thanks very much for being here.