Former Presidential Candidate, Congressman Ron Paul, MD, (R-Texas) is no friend of the Federal Reserve Bank. In fact, he favors its abolition.“From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble last year, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy,” according to Dr. Paul in a speech to the House of Representatives.
Although the Federal Reserve Bank overtly manages the money supply to even out the economic cycle, such intervention is anathema to Congressman Paul. He contends that the Fed is unconstitutional because that document grants Congress alone the authority to coin money and regulate the currency’s value, not delegate those functions to a central bank. He is particularly upset when the Fed increases the money supply for what he characterizes as a means to hide from the public the true cost of “the welfare-warfare state.“
As part of the spirit of financial reform sweeping through Washington, DC, Ron Paul’s amendment to Barney Frank’s “Financial Stability Improvement Act of 2009” was carried favorably out of committee, but the changes were supported by neither Frank, nor the Obama Administration.
A modification of HR 3996, the Paul-Grayson amendment passed the Financial Services Committee by a vote of 43-26. The entire bill is expected to be voted upon this week. The amendment dramatically increases the power of the federal government to audit the books of the Federal Reserve Bank, reining in the central bank’s independence.
Many, including President Obama, credit Fed Chair Ben S. Bernanke with having a major hand in averting a second Depression by enhancing the economy’s liquidity through lending $893 billion on favorable terms to financial institutions in trouble. These loans were granted at the sole discretion of the bank’s five governors without Congressional oversight. The dollar amount was greater than either the Obama stimulus package or the Gross Domestic Product of Mexico.
Under terms of the Financial Stability Improvement Act of 2009 the Fed would have even more power, being able to order any financial institution to downsize or cease certain activities if the bank determines that the business could present a threat to the financial stability of the US. The Fed could force under capitalized firms into bankruptcy, or set concentration limits for large holding companies. “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.” stated Congressman Paul.
The main provisions of the Paul-Grayson amendment are that it
- Lifts restrictions on auditing the bank by the US Government Accountability Office.
- Allows auditing of all items on the Fed’s balance sheets.
- Sets a six month delay before releasing the details of Federal Reserve market actions.
- Places no interference on the establishment of monetary policy by Congress.
The amendment has widespread support in Congress, attracting 300 co-sponsors in the House of Representatives.
According to one measure used by the American Journal of Political Science, Ron Paul was ranked the most conservative of all 3,320 members of Congress from 1937-2002. He was the only 2008 Republican Presidential Candidate to oppose the Iraq War Resolution of 2002. He also voted against the North American Free Trade Agreement, and advocates withdrawing from both the United Nations and NATO. During his 2008 Presidential campaign, he was the last Republican competitor of John McCain’s left in the race. His enthusiastic proponents called themselves Paulites.