Lori Rothman: We are now joined by Texas Congressman Ron Paul. He serves on the House Committee on Financial Services. Welcome to you, Congressman. We’d like to begin here with your thoughts on how financial regulatory reform is taking shape from what you’ve heard. Perhaps just now from Christopher Dodd, what details of the bill concern you the most?
Ron Paul: Well, the whole package because I believe in the free market. I don’t think we need any of that and you can’t deal with protection through regulations if you don’t deal with the fact the Federal Reserve is designed to be the lender of last resort and that causes all the moral hazards. So as long as you have the Fed sitting there to lend money to anyone who gets into trouble, you really don’t need a prohibition against bailouts, you just need people here who don’t vote for the bailouts and then we need some monitoring of the Fed. We need transparency of the Fed so that we know exactly what they’re doing. That’s where the real culprit is.
But to give the Federal Reserve more power under these circumstances behooves me because here, they’re wanting to put the Consumer Protection Agency in the Federal Reserve. And the Federal Reserve, as far as I’m concerned, is the group mostly responsible for our crisis. And now we want to give them more power. To me that makes no sense whatsoever.
Lori Rothman: Ok, so Congressman, I want to hit two topics here: the Consumer Protection Agency and the Fed. Let’s begin with the Consumer Protection Agency. We just heard Dodd say there was no deal yet as to what form it should take. Should this be an independent agency if you’re concerned that it’s housed under the Fed? I mean, people need information, right?
Ron Paul: Yeah, right, and they’re not going to get it. They’re going to bicker about it but I know I’ve read that Senator Dodd sort of favors putting it in the Federal Reserve, others want to make it independent. I don’t like either, but if I had a choice I’m going to support the independent agency over the Federal Reserve. I don’t want it in the Federal Reserve, but all these regulations just don’t work, you know.
Ever since the Depression we think regulations will solve our problems. We’ve had the SEC, we’ve had Sarbanes-Oxley, we still have our financial crises, and they think, “Well, we just need more regulations.” But what is flawed is this easy money system and this lender of last resort and no matter what they talk about, “too big to fail”, everything is too big to fail. If they think there is a crisis then there’s always favorites. Somebody’s too big to fail and they allow them to fail and others aren’t allowed to fail. So it’s a bunch of cronyism that we have to get to the bottom of it.
Lori Rothman: You know, you’re so outspoken on the Fed, you have been for some time now. You argue that the Fed is flawed, hasn’t done its job through the crisis. Isn’t the answer though is to fix it? Why not fix it? Because the Fed really manages crisis monetary policy, even fiscal policy, why do you want to eliminate it altogether? Who would do that?
Ron Paul: Well, I believe in the marketplace. I don’t believe anybody should fix interest rates. I mean, why should a secret body of individuals set interest rates and stick it to the elderly or anybody who wants to save money and they get 1%? Why don’t they deserve the market rate? Why do businessmen and bankers fight to have the Fed provide this credit and artificially set interest rates? The market isn’t supposed to do this. This means they don’t believe in free markets. This means they believe in a managed central economic planning system that always fails and we’re in the midst of such a failure.
Lori Rothman: Don’t you think the Fed’s been better with its transparency? The Fed governors and the bank presidents have been marching out constantly now making statements as to the economy, the Fed itself, and Bernanke have been on Capitol Hill testifying month after month.
Ron Paul: Yeah, and he’s going to be back more, more frequently, trying to dispel this desire by the American people to know a lot more but he never has once said that we’re gonna have access to what he’s doing in the open market committee. He positively opposes us knowing what kind of deals he makes with foreign central banks and foreign governments and foreign and international financial institutions. That’s where the shenanigans go on and yet he’s not given that. So he’s given token effort to have a little bit more transparency but that’s not transparency. That’s just more tokenism that covers up the real issue.
Lori Rothman: OK, on the financial institutions, how would you then wind down too big to fail firms that find themselves in crises?
Ron Paul: Well, I would just prohibit bailing out anybody. Anybody who’s in trouble should go bankrupt and people would be more cautious the next go around, the fact that the Fed is always there manipulating the economy, they make the assumption that they will be taking care of it for right now… if you want to get over this crisis that we have, you have to allow all the companies that are in over their head go and fail.
We have to quit dumping all the bad assets onto the taxpayer, whether the Federal Reserve’s holding them or the Treasury holds them. It’s absolutely anathema to what a free market should be doing. We punish the people who are successful, and we reward the people who have made all the monies while the bubble was being formed. And this system has to be revised. This just doesn’t work.
Lori Rothman: Congressman, more and more people are following you, you’re getting more and more support. The drumbeat is growing louder and louder with this groundswell of support for many of the ideas that you’ve shared here with us. Would you consider running for president in 2012?
Ron Paul: Well, to say I won’t consider it is probably premature, but I don’t have any plans to do it. And you’re right there is a lot of young people, especially, who are responding. The other day at Ohio State we had a lot of people turn out, and a lot of applause came when I talked about monetary policy and why we should be looking into the Federal Reserve. So the next generation will do something about the Federal Reserve once it’s very clear that the current system is not working.
Lori Rothman: Ron Paul, congressman from Texas, many thanks.