Show: Freedom Watch
Host: Judge Andrew Napolitano
Judge Andrew Napolitano: Hello, and welcome to Freedom Watch, your daily dose of raw liberty, streaming online at FoxNews.com. I’m your host, Judge Andre 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 bonuses to AIG executives are contracts between AIG and its biggest producers. There are enforceable contracts, and the Constitution prohibits the government from interfering with them. Recall that 79% of AIG’s stock is owned by the treasury department; that is the taxpayers. So one way to look at these payments is that the payment of bonuses of this magnitude means the AIG is making profits, and thus can keep making payments back to the taxpayers. Remember, we gave them 185 billion dollars.
The other way to look at this whole AIG bailout is that it was illegal because of the fraud involving Goldman Sachs, and unconstitutional, because the Constitution does not permit the government to choose whom to bail out and whom to let die on the line.
The third way to look at this is, will the AIG payments, over one hundred million dollars every quarter, go to the treasury to reduce debts, or will Secretary Geithner just re-spend it in utter disregard of the law and the Constitution?
Joining me now to discuss all of this is one America’s last great defenders of freedom and personal liberty, Congressman Ron Paul joins us from our nation’s capital. Congressman Paul, welcome back to Freedom Watch.
Ron Paul: Thank you, Judge. Nice to be with you.
Judge Andrew Napolitano: So, no surprise the government now is sitting on many billions of dollars which is money paid back by AIG and by banks from TARP. And it doesn’t want to put that money in the treasury bank accounts, it wants to re-spend it. The last time I looked at the Constitution, it said the Congress decides how tax dollars are spent, not the treasury secretary. What are we to make of this?
Ron Paul: Well, what we make of it is that it’s getting further out of control. If they get away with this, it would just further expand this notion. Because it’s been done in some other areas, you know, in the drug war, they confiscate certain things and turn them over to different people without it going through the treasury.
So this is another example that reminds you of what Mises always said, that if you create one intervention, you get 2 to 3 more problems. And it was the interventions of the bailouts that created these problems of who gets the money and how and why. But your point about the money coming back from these guys usually making money of us anyway, they wouldn’t have made anything, they would have been broke and been in bankruptcy. Though they are making money, and they say it’s coming back, and they want to put it in a slush fund. I mean, that’s just further removal of the Congress from this responsibility, and I consider that one of the major problems we face; is that Congress has too often reneged on its responsibility and has allowed the executive branch and the judicial system that get out of control.
Judge Andrew Napolitano: One of your own liberal democrat colleagues referred to this whole TARP thing as “Bait and Switch”. I mean, Hank Paulson and President Bush came to the Congress in the fall of 2008 saying, “We have to buy toxic mortgage assets, and we need 700 billion with which to do it”. The Congress gave the then secretary Paulson a blank check. They didn’t buy a single toxic mortgage asset! They force-fed it to banks that didn’t want it, and they bailed out banks and insulated them against the consequences of their own bad management. Don’t bailouts like this encourage banks and corporations to be reckless, because they believe that somehow somewhere the government will provide a safety net?
Ron Paul: Yes, it’s called moral hazard, and there was plenty of that around for a long, long time because the guarantees have always been there, either direct or implied. You know, the Fannie Mae and Freddie Mac was implied, there were a lot of guarantees. So this is even to make it worse, even in the bailout, there were no restrictions. So we have guaranteed that the problems will continue and they will not be cleaned up. And that’s why we should make sure that we return to the marketplace.
And as you point out, the role of government ought to be to enforce contracts; that’s one responsibility of the federal government to guarantee that contracts are carried out. But this whole idea that they have abused the contracts and violated the contracts means that there is no rule of law. If a few private individuals had done this without government sanction, you know, they usually go to jail because it’s considered fraud. And yet now, we are participants in that. We in the Congress and the executive branch, and it’s not a very good sign for the future of this country unless we get to the bottom of this and understand what’s really going on.
Judge Andrew Napolitano: One of the reasons I suggest for this is illegal is because of the fraud involved. We now know that Tim Geithner’s lawyer, when [Geithner] was the head of the New York Fed, basically said to AIG, “Hey AIG, don’t tell anybody that you owe a lot of money that Goldman Sachs. And for heaven’s sakes, don’t tell anybody that you agreed to pay Goldman Sachs a 100 cents on the dollar. If that word gets out, if the Congress hears about that, this deal will collapse”.
Now you know, Congressman Paul and everybody in Washington now knows, if you mislead the government on a simple form to buy a $1,000 dollars savings fund, you can be prosecuted. Here you have government lawyers telling the recipients of a 185 million dollars to mislead the Congress on the forms in order to acquire that. Why isn’t anybody being prosecuted?
Ron Paul: You know, it’s the sort that reminds me of the Enron scandal. They committed fraud and the SEC bailed, you know, to prevent this problem. But it was caught by the state, and the state prosecuted these individuals under fraud laws. They were prosecuted. But you know, under our system of our banking system of examination, you know, it has to go back to even not having any information from the discount window what the Fed does. They say, “Oh, we know this. This will expose the dangers and the weaknesses of the system”. So the Federal Reserve and our secretary of the treasury come in and they hide the factors. If you had free market insurance on these deposits, these kinds of things would be made available because you would be rated by these agencies. And it wouldn’t be all banks together, but individual banks could get into trouble. But the whole purpose of the market would be to allow us to know what’s going on and they’re doing exactly the opposite here. The government is participating not only in fraud, but in hiding the information that the individual investors, lenders and borrowers should have access to.
Judge Andrew Napolitano: Congressman Paul, what will happen to the average American if the dollar collapses and the value of it goes down to significantly less than the value we accept it is worth today.
Ron Paul: Well, it all depends on how fast and when and what we do. But if it collapse entirely then you’re going to have total collapse of the system and chaos. I hope we wake up before then, but in the meantime everybody gets a lot poorer. And this is always going on now; who gets poorer the fastest. Right now Wall Street… a lot of them and Goldman Sachs haven’t got poorer, but the American people are getting poorer all the time. They don’t have more purchasing power every month. And they don’t have better jobs; they’re still losing their jobs.
So we are going to continue. As the dollar depreciates, people get poorer because we’re paying back debt. And this is what Austrian economics teaches. They say that if you destroy a currency, you destroy the middle class. This is why it’s so dangerous politically, you know, whether you look at Germany or South America or Central America or Mexico, the middle class always gets wiped out and it introduces the possibility of political chaos. And that’s why it’s so dangerous.
Judge Andrew Napolitano: Before I let you go, Congressman Paul, two days ago I spoke to your son, Rand Paul. It now looks like there may be another Paul in the United States Congress. He’s doing pretty well so far in Kentucky. Chip off the old block?
Ron Paul: Well, he’s doing pretty good. I was over the other day I was very impressed with how things are going. I was asking him whether I had to call him senator or not when he wins, and he said, no, I wouldn’t have to keep calling him senator just as long I wouldn’t keep calling him Randy all the time.
Judge Andrew Napolitano: Yeah, one last thing: the Tea Parties; do you still see that as a base from which anger at the government and frustration at its trampling of the constitutional liberties can be challenged into a political response?
Ron Paul: Yes, and it’s very disorganized and it’s not a monolith but I think it’s all healthy because they don’t come into that organization as part of the Republican Party or the Democratic Party. A lot of them would like to take it over and control it. But they’re not going to be able to. I think this represents the people who are disgruntled with the current status quo, the government as it is, the monetary system and the tax system. So to me it is very, very healthy. But you’re not going to be able to go and visit ten Tea Parties and find out that they all believe in the same thing. But I think it’s very, very healthy and we have to sort it out and make sure the message being that they are unhappy with the federal government in particular, and that a much more freedom-oriented philosophy is what we need and hopefully that will be the dominant theme of the Tea Party movement.
Judge Andrew Napolitano: Congressman Ron Paul, as always, the highlight of my week. Thanks for joining us on Freedom Watch.
Ron Paul: Thank you, Judge.