Federal Reserve

The truth is that Americans are still losing jobs, the Fed is still inflating, and more regulations are in the works that will prevent jobs and productivity from coming back. We are on this trajectory for the long haul. The claim has been made many times that this administration has only had a year to clean up the mess of the last administration. I wish they would at least get started! Instead of reversing course, they are maintaining Bush's policies full speed ahead. They are even keeping the Bush-appointee in charge of the Federal Reserve! They are not even making token efforts at change in economic policy. And for all the talk of transparency, we hear that some powerful senators will do all they can to block a simple audit of the powerful and secretive Federal Reserve.

Last week, the Financial Crisis Inquiry Commission kicked off their first round of hearings on the causes of the economic meltdown on Wall Street. The commission is being compared to the the Pecora Commission launched in 1932 to investigate the causes of the Great Depression. The Pecora commission is beloved by those who believe the solution to every problem is more laws because it was used to justify a number of new laws, including Glass-Steagall. Of course, none of those laws addressed the real causes of the Great Depression. It was the introduction of unsound monetary policy and central economic planning pursued by the Federal Reserve that really threw everything off balance. The Fed was founded in 1913 to stabilize the economy and prevent a recurrence of the short-lived Panic of 1907, but instead it promptly produced the Great Depression which lasted more than 15 years.

Last week it was revealed that when Treasury Secretary Tim Geithner was Chairman of the New York Federal Reserve, he urged AIG officials not to disclose to the Securities Exchange Commission relevant details of agreements with banks to bail out Goldman Sachs. Apparently he felt at the time that regulators and the public would be angry that taxpayer money was used to fully compensate bankers who made some horrifically bad investment decisions. These banks should have suffered the consequences of the huge risks they were taking. After all, they kept plenty of rewards when times were good. Instead, the Fed found a way to socialize these major losses so these banks could survive and continue making more bad decisions, at the expense of the American people and the value of the dollar.

The new details revealed today regarding AIG's bailout in 2008 come as no surprise to those of us who believe that the American people deserve full transparency from the Federal Reserve. It also demonstrates why defenders of the Fed are so adamant about 'independence' by which they really mean secrecy.

This past week we celebrated the end of what most people agree was a decade best forgotten. New York Times columnist and leading Keynesian economist Paul Krugman called it the Big Zero in a recent column. He wrote that "there was a whole lot of nothing going on in measures of economic progress or success" which is true. However, Krugman continues to misleadingly blame the free market and supposed lack of regulation for the economic chaos.

Madame Speaker, I rise to introduce the Free Competition in Currency Act of 2009. Currency, or money, is what allows civilization to flourish. In the absence of money, barter is the name of the game; if the farmer needs shoes, he must trade his eggs and milk to the cobbler and hope that the cobbler needs eggs and milk. Money makes the transaction process far easier. Rather than having to search for someone with reciprocal wants, the farmer can exchange his milk and eggs for an agreed-upon medium of exchange with which he can then purchase shoes.

I was pleased last week when we won a vote in the Financial Services Committee to include language from the Audit the Fed bill HR1207 in the upcoming financial regulatory reform bill. As it stands now, if HR 3996 passes, because of this action, the Federal Reserve’s entire balance sheet will be opened up to a GAO audit. We will at last have a chance to find out what happened to the trillions of dollars the Fed has been giving out.

Finally, the blanket restrictions on GAO audits of the Fed that have existed since 1978 will be removed. All items on the Fed’s balance sheet will be auditable, including all credit facilities, all securities purchase programs, and all agreements with foreign central banks. To calm fears that we might be trying to substitute congressional action for Fed mischief in tinkering with monetary policy, we agreed to a 180 day lag time before details of the Fed’s market actions are released and included language to state explicitly that nothing in the amendment should be construed as interference in or dictation of monetary policy by Congress or the GAO. This left no reasonable objections standing and the amendment passed with a vote of 43 to 26.

"While HR 3996, if passed, will grant sweeping new powers to the Federal Reserve, at least with this amendment attached, it won't be acting in secret anymore. This is a major victory for Federal Reserve transparency and government accountability. I am very grateful to Congressman Bachus and all the other Members who were so supportive and helpful in this effort," stated Congressman Paul.

The only thing you will ever learn about history is that nobody ever learns from history! In effect, we, as individuals, who live in our short time span on earth, think we live in an infallible society. Has it ever occurred that you might be living in either one of 3 phases of an empire?

Well fellow people on this board - all signs of an Empire in Free Fall Decay are here ...

Last week a new bill was introduced in the Senate to audit the Federal Reserve. Some backers of my bill HR1207 and the existing Senate companion bill S.604 were a little miffed at this, but depending on how you think about it, this new legislation poses no great threat to our efforts.

With the economy in shambles, people are looking for answers - not just because of lost savings on Wall Street, but because of lost houses on Main Street. Because of the many problems we face, the Federal Reserve and its powers over the economy have come under scrutiny. This translates into a lot of political pressure on Congress. With all the House Republicans signed on as co-sponsors and over half of the Democrats, HR 1207 has enormous bipartisan support. It would be disingenuous for Washington not to embrace the principles behind this bill after all the promises for transparency. How can one credibly argue for more transparency in government in one breath and defend the secrecy of the Federal Reserve in the next?

Last week I was very pleased that the Financial Services Committee held a hearing on the Federal Reserve Transparency Act, HR 1207. The bill has 295 cosponsors and there is also strong support for the companion bill in the Senate. This hearing was a major step forward in getting the bill passed.

I was pleased that the hearing was well-attended, especially considering that it was held on a Friday at nine o’clock in the morning! I have been talking about the immense, unchecked power of the Federal Reserve for many years, while the attention of Congress was always on other things. It was gratifying to see my colleagues asking probing questions and demonstrating genuine concern about this important issue as well.

It has been an interesting week indeed for the Federal Reserve. Early this week, it was announced that President Obama intends to reappoint Fed Chairman Ben Bernanke to a second term in January, signaling a vote of confidence in him. Bernanke seems to be popular with the administration and with Wall Street, and with good reason. His lending policies have left big banks flush with newly created cash that covers up old mistakes and allows for new ones. By buying up mountains of Treasury debt he has also enabled spending to soar to ridiculous levels that should startle any responsible economist, and scare any American concerned about the value of the dollar. However, these highly sensitive decisions about our money are not made by economists, they are made by politicians. Bernanke, like most of his predecessors, is the politician’s best friend. However, there is no reason to believe any other central planner would behave any differently, considering the immense political pressure on the Fed.

The Federal Reserve in collaboration with the giant banks has created the greatest financial crisis the world has ever seen. The foolish notion that unlimited amounts of money and credit, created out of thin air, can provide sustained economic growth has delivered this crisis to us. Instead of economic growth and stable prices it has given us a system of government and finance that now threatens the world financial and political institutions.

Real unemployment is now 20% and there has not been any economic growth since the onset of the crisis in the year 2000, according to non-government statistics. Pyramiding debt and credit expansion, over the past 38 years, has come to an abrupt end—as predicted by free-market economists. Pursuing the same policy of excessive spending, debt expansion, and monetary inflation, can only compound the problems and prevent the required correction. Doubling the money supply didn’t work; quadrupling it won’t work either. The problem of debt must be addressed.

Last week I was very pleased that hearings were held on the independence of the Federal Reserve system. My bill HR 1207, known as the Federal Reserve Transparency Act, was discussed at length, as well as the general question of whether or not the Federal Reserve should continue to operate independently.

The public is demanding transparency in government like never before. A majority of the House has cosponsored HR 1207. Yet, Senator Jim DeMint’s heroic efforts to attach it to another piece of legislation elicited intense opposition by the Senate leadership.

Congressman Ron Paul's Federal Reserve Transparency Act, HR 1207, has reached and surpassed the level of 218 cosponsors in the House of Representatives, which means it is now cosponsored by a majority of the members.

The 218th cosponsor was Dennis Kucinich (OH-10), and the bill has since received its 222nd cosponsor.