Ron Paul on the Financial Reform Bill

Ron Paul appeared on The ED Show to discuss Senator Dodd’s financial regulatory reform bill.

Show: The ED Show
Channel: MSNBC
Date: 03/15/2010


Ed Schultz: Earlier today, Banking Committee chairman, Chris Dodd, laid out a financial reform bill that everyone admits has been watered down to win Republican votes. If you want to see how the bill lost its teeth, just look at the fine print. For example, the bill creates a Consumer Protection Agency to be a watchdog on credit cards and mortgages. But it would be inside the Federal Reserve, not an independent agency. It allows shareholders and company boards to vote on executive compensation. But those decisions are not binding. The bill lays out a process to “Wind down the so called too-big-to-fail banks”. But there is a lot of red tape and a potentially lengthy appeals process for that. And it has a new tough regulation for risky derivatives like the kind that caused the financial crisis in the first place. But the fear is that the banks, or should I say that the fear is that thanks to lobbyists and lawyers many of the worst offenders would be exempt.

Joining me now is Texas congressman and former presidential candidate, Ron Paul. Congressman, good to have you on tonight. From what you know of this bill, does it go far enough? I know that you and Congressman Grayson have got a bill up there to audit the Fed. But what about this Consumer Protection Agency being an arm of the Fed? What do you think?

Ron Paul: Well, it gives more power to the Fed and doesn’t do the job. Of course, I don’t argue for more regulations. But I support Barney Frank on this, that it should be independent and out of the Federal Reserve. The whole idea of putting it in the Federal Reserve and giving them more power. And they get the financing, they call themselves financing, which means it’s out of the prerogatives of the Congress to audit it. So to me I don’t think it will do the job. I think everything they have in there, there are loopholes in it. Whether they’re trying to pretend to regulate the big banks and all, I think there are a lot of loopholes in that.

I’m for regulation, but I’m for much more regulation of the Federal Reserve. And I think as long as you have a Federal Reserve that is a lender of last resort, all the regulations in the world won’t compensate for this. Because they know and they work on the assumption that there is always availability of credit; that’s the purpose of the Federal Reserve – to be the lender of last resort. And that is what causes the moral hazard, that’s what causes people to make all the mistakes, and take these risks because they figure the Fed will be there to pick up the pieces, and the people get stuck.

Ed Schultz: Congressman, what about shareholders and board members deciding on executive compensation? Are you okay with that?

Ron Paul: Well, I think it’s a great idea, but I wouldn’t mandate it because I’m not a regulator. But I think that I wouldn’t be interested in buying into a company that runs rough shot over the stockholders. So yes, I like the idea that they would vote for it, but I just don’t go into this idea that the federal government can go in there and do that.

Ed Schultz: So what regulation would you be for, Congressman Paul? Would you be for the really new tough regulations on risky derivatives? How about that? Would that play well for you?

Ron Paul: Well, you know this Volcker rule, I sort of am sympathetic with. You know, to say that some of the things that can’t be put in there because they would be vulnerable to the FDIC insurance. And I voted against them, repealing Glass-Steagall for that very purpose. So I think that’s well intended, and hopefully I can support that. I don’t know the exact details of that. It’s something like inviting people to take risks and not restrain them. I don’t think we should open the door to the tax payer being liable to bail out all these people. So, something like the Volcker rule I would be sympathetic to and look at closely.

Ed Schultz: This is kind of a tough call for you small government guys, isn’t it? I mean, you don’t want Wall Street to run away with anybody’s money, but in the same sense you’re not one that wants a whole lot of government intervention and regulation.

Ron Paul: Yeah, that’s why I argue really for the true reform, and that is the reform of the Federal Reserve and the whole concept of money. Because once you allow governments and a secret bank like the Federal Reserve to create money out of thin air, you allow things like wars to be fought, because you don’t have to be responsible. The Fed will pick up the debt.

Ed Schultz: Yeah.

Ron Paul: And the deficits are huge today because of the Fed. If people are worried about a 2 trillion dollar increase in the national debt this year, it couldn’t happen if you didn’t have the Federal Reserve to be the lender of last resort to the politicians for whatever reason. But there is a collusion here; that conservatives like to do it to fight wars, liberals like to do it to have unlimited welfare. And therefore the Fed benefits both the conservatives and the liberals, and it destroys the money ultimately. And that’s why I’m so interested in looking at the Fed in detail.

Ed Schultz: Congressman, good to have you on, thank you. Ron Paul from Texas.

Ron Paul: Thank you.