Rep. Ron Paul, R-Texas, had his final say in a House committee hearing Wednesday against his long-time antagonist, the Federal Reserve. Paul retires at the end of this year. Below is the transcription.
Ron Paul: When the Fed talks about independence, what they're really talking about is secrecy, not transparency. And it's the secrecy that I don't like and that we have a right to know about. What the GAO cannot audit...is monetary policy...it would not be able to look at agreements and operations with foreign central banks, governments and other banks, transactions under direction with the FOMC, discussions or communications between the board and the Federal Reserve system about all those items.
It's really not an audit without this. It's still secrecy. And why this is important is because of what happened four years ago. It's estimated that the amount of money that went in and out of the Fed for the bailing out overseas was $15 trillion. How did we ever get into this situation where Congress has nothing to say about trillions and trillions of dollars of bailing out certain banks and governments through these currency swaps. And the Chairman has publicly announced that he's available. There's a crisis going on in Europe, part of this dollar crisis going on that's been building and it's unique to the history of the world and monetary policy, and we stand ready. Who stands ready? The American taxpayer because we're just going to print up the money. As long as they take our dollars, we'll print the money and we'll bail them all out, and we're going to destroy the middle class. The middle class is shrinking. The banks get richer. The middle class shrinks. They lose their houses. They lose their mortgages. This system is biased against the middle class and the poor. So, I would say that this, if we protect this amount of secrecy, it is not good policy and it's not good economics at all. And it's very unfair.
My question is Mr. Chairman, who's responsibility is it, under the Constitution, to manage monetary policy? Which branch of government has the absolute authority to manage monetary policy?
Fed Chairman Ben Bernanke: The Congress has the authority, and it's delegated it to the Federal Reserve. That is a policy decision you made.
Paul: They can't transfer authority. You can't amend the Constitution by saying you're going to create some secret group of individuals and banks. That's amending the Constitution. You can't do that, and all of a sudden to allow this to exist in secrecy. And who's responsibility is it for oversight?
Bernanke: Congress has the authority of oversight. We fully accept that, and we fully accept the need for transparency. But it's a well-established fact that a central bank would provide better outcomes. There's no constitutional reason why Congress couldn't take over responsibility for monetary policy. You could do that if you wanted to. But I'm advising you that it wouldn't very good from an economic point of view.
Paul: But if it's allowed to be done in secret. This is the reason why I want to work within in the system. What I want to say is Congress oughta grow a backbone to say we deserve to know, we have a right now, we have an obligation to know, because we have an obligation to defend our currency. It's the destruction of the currency that destroys the middle class. There is a principle in free-market banking that says if you destroy the value of the currency through inflation, you transfer the wealth of the middle class, and it gravitates to the very wealthy. The bankers, the government, the politicians, they all love this.
It is a fact that the Federal Reserve is the facilitator. You couldn't have big government. If everybody loves big government, love the Fed, because they could finance the wars and all the welfare you want. But it doesn't work, and it eventually ends up in a crisis. And it's a solvency crisis, and it can't be solved by printing a whole lot of money. So, I think the very first step in transparency and for us to know. We have a right to know, and you may be correct in your assumption and at least I'm sure you believe this. Maybe I should be talking to the Congress. We should stand up and demand yes we believe to know. Trillions and trillions of dollars being printed out of thin air and bailing out their friends. They stand ready to do it. The crisis as far as I'm concerned is its early stages. It's far from over. We're in deep doldrums and we never change policy. We never challenge anything. We just keep doing the same thing. Congress keeps spending the money. Welfare expands exponentially. Wars never end. And deficits don't matter.
And when it comes to cutting spending, Republicans and Democrats get together and say, 'Oh no we can't really cut, and if we do cut we only cut proposed increases.' And you stand there, you stand there, and facilitate it all.
Rep. Barney Frank, D-Mass.: Can we get the answer in writing to that question?
Bernanke: Congressman Paul, your objections are to the structure of the system as you mentioned. But all of the actions we took during the crisis, the swaps, all of those things are fully disclosed. It's not a question of information. It's a question of whether or not you want to give the Fed those powers. If you don't want to, of course, Congress has the right to take them back.