Channel: Fox News
News Anchor: Our guest is one of the most outspoken critics of the Fed, Republican Congressman Ron Paul of Texas joins us now for a on Fox Business.
Welcome, Congressman. So, you know, you’ve been very critical of the Fed and the Fed is an important piece of regulatory reform. Do you feel that the Fed has done anything right, it can do anything right in the change in language in the bill as it stands today?
Ron Paul: Well, I wouldn’t expect too much. I think they’re going to have a lot more authority and the real power of the Fed is the power to create money, and they don’t even talk about that. And, of course, Fannie Mae and Freddy Mac was a major player in bringing about our crisis. And this bill doesn’t deal with them. So I’m not too optimistic that this is going to help very much. I think it is going to cost a lot of money. But you just can’t solve the problem of malinvestment and excessive debt created by the Fed by more regulations. The SEC has been around for a long time, Sarbanes-Oxley has been around. It doesn’t really help us. So to come up and say we can solve these problems with more regulations… we have regulators coming out our ears and they say, “Well, they slipped up. We just need a few more.” But that’s just the opposite of what the market should be doing.
News Anchor: Well, Representative, what you see and what has come forth – our reporter was just pointing out some of it – it now appears that it’s taxpayer money that’s going to have to pay into that 19 billion dollar hole instead of what would have been the banks. With 50 billion market cap or more, kind of most of the same guys who got us into trouble in the first place. On one hand people are saying, “Why wasn’t it the banks who were made to feel some pain here?”
Ron Paul: Well, bankers sometimes are taxpayers too. And, you know, when they took some fees, even recently, a lot of times they would take the fees and charge the banks that didn’t get into trouble to bail out the other ones. This whole idea that you have to go to the banks to collect fees in order to resupply the FDIC…
News Anchor: But it has worked so well, Representative, for the FDIC, has it not?
Ron Paul: Well, they’re always broke, they need more money now and they can’t do it. Could the FDIC have bailed out all the banks without the Federal Reserve? The Federal Reserve creates trillions of dollars to try to alleviate some of this pain and suffering. It’s the whole system that is flawed, and they don’t deal with that. So all that we’re doing is prolonging our agony. I mean, we’re not addressing the substance of the problem, and that is the monetary system, fractional reserve banking, the creation of credit out of thin air, the dependence on regulations to solve our problems, the moral hazard of Fannie Mae and Freddy Mac; they haven’t addressed any of that. So I don’t see how anybody can expect that this bill is going to help. They’re already arguing about is who’s going to get stuck with the bill, and right now are the big banks are going to pay in or will the taxpayers? Ultimately, the people get stuck with it, even when they create money out of thin air.
News Anchor: Congressman, so what’s the alternative? If it’s not going to be the Federal Reserve to regulate mortgages and credit cards, there’s got to be some type of consumer protection in place. Certainly we’ve got to make sure that no bank is too big to fail. What is the answer to that?
Ron Paul: Why?
News Anchor: What would you do?
Ron Paul: Why is that the case? If they’re too big and they get into trouble, let them go bankrupt. There are a lot of very strict rules in the marketplace. You go bankrupt, if you commit fraud you go to jail. If you’re bankrupt, you go out of business. But you don’t have to depend on bailouts from the treasury, from the Federal Reserve, or the taxpayer. So this is a completely different system and thinking that we can alleviate the discomfort of all these bankruptcies and the malinvestment… As long as you patch it up they’re back doing the same thing again. The derivatives market will remain as long as there is somebody backing them up. And the Fed’s role is to be the lender of last resort. That is their job.
News Anchor: Representative, should we have gone back to the way it used to be when we had Glass-Steagall and there was a separation between investment banks and actual depositor banks. And guess what, for all the time that that was in place, we never had an unwinding of the system like we have had in the past couple of years.
Ron Paul: Yeah, it’s interesting. In the free market you don’t regulate and tell banks what they can do or not do. But I voted against the repeal of Glass-Steagall, not because I’m opposed to them having free access to the marketplace, I oppose it because it expands the moral hazard. That meant the insurance and the lender of last resort all put pressure on the FDIC and all these agencies. So I was opposed to it because it put a bigger burden on the taxpayers. And I said, eventually the bubble will get so big, it will burst and the taxpayers will have to pay the bill. So it isn’t the fact that they were separate, it was the fact that the bubbles had just not build up. No, the market could handle that, but as long as you guarantee that it’s too big to fail and everybody is going to get bailed out, nobody really thinks about what they should do to protect their own interests.
News Anchor: So, representative, as we finish up here, how’s your son doing? What’s he being doing these days? He’s kind of keeping a low profile for the moment away from the media.
Ron Paul: Well, I think he’s doing a lot of what he’s supposed to be doing: campaigning in the state and talking to a lot of people and I understand things are going pretty well for him. I haven’t been out there since the election, since the primary was over and I didn’t go in there much in the primary anyway. But I understand he’s doing quite well and he’s reaching the people and that’s what that whole Tea Party Movement was all about. I mean, his turnouts are huge and they’re usually the so-called Tea Party turnouts rather than strictly the Republican Party. And right now, of course, he has to reach out to a lot more people than just the Republican Party, because he has to reach the moderates and the independents.
News Anchor: Well, we’ll talk to you again, thank you so much, Representative.