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Feb. 25 2010 - 11:07 am | 1,886 views | 0 recommendations | 2 comments

Bernanke should have answered Ron Paul’s ‘bizarre’ questions

follow1In a post yesterday, I asked readers to help me figure out if Ron Paul’s accusastions that the Federal Reserve loaned money to Saddam Hussein and paid off the Watergate burglars were accurate in any way.  Commenter sailingaway pointed me to this article from The Hill, which then directed me to a few other sources.  Turns out that Ron “Get Off My Land” Paul might be on to something.

“George Washington” writing at Zero Hedge has this to say:

[I]n 2008, the University of Texas published a book by Robert D. Auerbach – an economist with the U.S. House of Representatives Financial Services Committee for eleven years, assisting with oversight of the Federal Reserve, and subsequently Professor of Public Affairs at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin – which seems to support Paul’s questions.

In Deception and Abuse at the Fed, Auerbach claims:

Major instances of Fed mismanagement and abuse of power that were exposed by [House Financial Services Committee Chairman/Ranking Member Henry] Gonzalez, including:

  • Blocking Congress and the public from holding powerful Fed officials accountable by falsely declaring—for 17 years—it had no transcripts of its meetings;
  • Manipulating the stock and bond markets in 1994 under cover of a preemptive strike against inflation;
  • Allowing $5.5 billion to be sent to Saddam Hussein from a small Atlanta branch of a foreign bank—the result of faulty bank examination practices by the Fed;
  • Stonewalling Congressional investigations and misleading the Washington Post about the $6,300 found on the Watergate burglars.

The emphasis there was in the original Zero Hedge article, and, lest you think it’s just some wacky Texas lunatic at work, here area  few other sources that raise similar questions.  It’s worth noting, however, that “George Washington” ends the post neither by endorsing nor denying any of Auerbach’s claims.

In 1992, the LA Times published an article describing how the Federal Reserve provided loans to Saddam through the Departments of Agriculture, Treasury, and State.  The Zero Hedge post describes the Fed’s role as “minor and indirect,” but they were a participant nonetheless.

And then there’s this, from a 2004 New York Times Op-Ed by Martin Mayer:

But there is another line of questioning officials might pursue — one that depends less on the cooperation of Mr. Hussein than on the assistance of the United States Federal Reserve Bank. Among Mr. Hussein’s possessions when he was captured was three-quarters of a million dollars in United States currency in crisp new bills. Whence came the gentleman’s stash?

Although Saddam Hussein’s government had many sanctions against it, it may well be that no laws were broken in the passage of the Federal Reserve notes from the mint to Tikrit. But it would be interesting to know which banks were collaborators in getting that cash to the tyrant of Iraq.

Unfortunately, the search for these witting or unwitting collaborators cannot even get started, because the Federal Reserve Board will not permit regional banks to reveal the identity of the purchasers of large blocks of United States currency. There is no law that prohibits such disclosure; it’s simply a Fed policy.

I don’t know anything about Martin Mayer or the specificities of his argument, and the New York Times Op-Ed page has been known to print completely baseless claims.  That said, this Op-Ed is from 2004, hardly ancient history, and if Bernanke found Paul’s line of questioning “bizarre,” why didn’t he simply tell Paul what exactly was so “bizarre” about asking questions that had appeared on the NYT Op-Ed pages a mere six years earlier?

As far as the Watergate accusations go, the Milwaukee Sentinel published this in 1982 [via]:

Police who searched the room the Watergate burglars used found $4,200 in $100 dollar bills, all numbered in sequence. Proxmire asked the Federal Reserve Board where the money came from. As he explained in a letter to the late Rep. Wright Patman (D-Tex.), chairman of the House Banking Committee: “I got the biggest run-around in years. They ducked, misled, lied, and gave me the idiot treatment.

Again, getting the runaround from a giant bureaucracy in and of itself doesn’t prove anything — but clearly Paul’s questions didn’t appear from thin air.  Treating them as though they did only furthers the perception of the Fed’s actions as opaque and not subject to oversight, which in turn only fuels anti-government hatred.

Ultimately, I have to come down on the same side as “George Washington” at Zero Hedge here.  I don’t know whether Paul’s accusations are true or false, but they clearly aren’t crazy or bizarre.  Bernanke’s should have answered those questions, and since he didn’t, he should be asked them again.


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  1. collapse expand

    I’m loving it, Ron Paul is tearing it up right now and he has every right to ask these questions. The Federal Reserve hasn’t been working without a full audit for a long time and for many years has been working behind closed doors making deals and adjusting the money supply as they see fit. It’s high time to blow the whole operation wide open and start making some big reforms – my preference, by abolishing the Federal Reserve altogether and work towards backing our money with a basket of currencies while allowing for private currencies to be used for legal tender between two consenting people.

  2. collapse expand

    Thanks. It looks like Ron Paul made a statement on the House floor about this today, but of course, fewer cameras were running…


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