Ron Paul launched his sharpest attack yet on the Federal Reserve, challenging Chairman Ben Bernanke to open up the Fed’s secret archives so that Congress and the public can find out what the enigmatic institution has been up to in recent decades.
Location: House Financial Services Committee
Event: Hearing on Monetary Policy and the State of the Economy
Ron Paul: The Federal Reserve Transparency Act which has passed the House already is something that the Federal Reserve obviously has been opposed to, and one of the reasons they’re opposed to it is, as I understand, it would politicize monetary policy, which is not what the bill actually does.
The other reason they give is that if Congress had any subtle influence they would inflate to more than the Federal Reserve might want to. It’s sort of ironic. The Federal Reserve kept interest rates too low too long and the consensus now in the financial community now is that it’s true, interest rates are now still down at 1%, so hardly could the Congress influence the Federal Reserve in a negative way by causing them to inflate even more.
There has been a political cozy relationship between Congress and the Federal Reserve, although the Congress has been derelict in their responsibility to perform oversight. But when it comes to debt, the Fed is there, they can monetize the debt and keep interest rates low, the Congress can keep spending and get reelected, they don’t have to raise taxes so the Fed can act as a taxing authority, you print the money, dilute the value of the money, prices go up and price inflation is a tax. When people pay a lot more for medical care than they used to, they ought to think about the inflationary tax.
Also, the Fed accommodates the Congress by liquidating debt, by debasement of the currency, the real value of the money goes down, the real debt actually goes down. So in many ways the Congress and the Fed does have a pretty cozy political relationship.
But I would like to get to more specifics on the transparency bill because it has been reported in the past that during the 1980s that the Fed had actually facilitated a $5.5 billion loan to Saddam Hussein and he then bought weapons from our military-industrial complex, and also that is when he invested in a nuclear reactor.
A lot of cash was passed through and a lot of people supposed it was passed through the Federal Reserve when there was a provisional government and after the 2003 invasion. That money was not appropriated by the Congress as the Constitution says.
Also, there’s been reports that the cash used in the Watergate scandal came through the Federal Reserve, and when investigators back in those years try to find out, they were always stonewalled and they couldn’t get the information.
My question is, you object to this idea that I would say, give us six months and after six months, you could find out what we’re doing. But what about giving you ten years? Would you grant that the American people deserve to know whether the Federal Reserve has been involved in this and what kind of shenanigans are involved with foreign countries and foreign central banks and find that possibly you’re working right now to bail out Greece for all we know.
But would you grant that after 10 or 15 years, the American people deserve to know, it seems like if the Fed was not involved with this at all, it would be to your advantage to say, “No, we don’t do stuff like that!”. But why couldn’t we open the books up 10 years back and find out the truth of these matters?
Ben Bernanke: Well Congressman, these specific allegations you’ve made I think are absolutely bizaare, and I have absolutely no knowledge of anything remotely like what you just described. As far as the 10 years, after 5 years we produce complete transcripts of every word said in the FOMC meetings so you have every word in front of you.
Ron Paul: But can we get the results of every agreement, every loan made, every single thing to foreign governments.
Ben Bernanke: Yes. Every single thing. Yes, sir.
Ron Paul: Well, I’ll tell you what, there’s been a lot of information when this came out in the early years they did have an effort and the Federal Reserve never participated in this. And it’s easily covered up, but I think eventually though, because the system is not viable and that it is this cozy relationship, that we will get to the point where something will have to be done about this financial system.
So as long as we continue this, this cover-up and quite frankly, I do not believe that the real effort to facilitate some of these things that have been done in the past would become available to us because it is in the interest of the Federal Reserve to make sure that the people don’t know. And right now today, is it quite possible that, have you talked with any international groups about us participating in the bailout of Greece?
Ben Bernanke: I have not.
Ron Paul: But the Federal Reserve under the law are capable of doing this. Isn’t it correct that the Fed can buy debt of other nations and under the Monetary Control Act of 1980, is that not permissible?
Ben Bernanke: Yes, that’s true, but we have no plans whatsoever to be involved in any foreign bailouts or anything of that sort.
Ron Paul: But if they did, it certainly would be to our advantage to know about it.