Ron Paul’s Fed-Bashing Wins Over Lawmakers Wary of Bank’s Power
For U.S. Representative Ron Paul, the ninth time may be the charm.
After fighting for decades to increase scrutiny of the Federal Reserve or abolish it, the Texas Republican’s proposal requiring audits of the central bank’s interest-rate decisions is getting traction.
The long-shot 2008 presidential candidate whose anti-tax, anti-government politics struck a chord with a swath of voters is again channeling public frustration with big government, bailouts and rising federal debt. And as Paul trains his sights on his favorite villain, the Fed, many in Congress are listening.
“We live in the age of the people demanding more transparency, and that came out of the failure of Congress to monitor the bailouts,” Paul, 74, said in an interview. “I was able to tap into that.”
Paul’s message, once delivered mostly from the political margins, has found broader acceptance as many lawmakers blame the Fed for failing to curtail excesses that led to the financial crisis.
These lawmakers say that as the Fed’s role has expanded, it hasn’t sufficiently accounted for putting taxpayers’ money at risk, including aid to companies such as Citigroup Inc. and American International Group Inc., both based in New York.
“He’s ready with an argument that fits the moment,” said Bruce Buchanan, a political scientist at the University of Texas in Austin. “It’s an argument that used to seem extreme, but now seems reasonable given the view the Fed contributed to the financial meltdown by failing to exercise due oversight.”
The House is to start debate today on broader legislation overhauling U.S. financial rules. Included in it is Paul’s proposal to remove the shield on congressional audits of monetary policy.
Fed Chairman Ben S. Bernanke, at a Senate hearing Dec. 3, said Paul’s proposal could subject the central bank to political pressure and undermine its credibility.
“My fear is that if we were to take what might be perceived as an unpopular step, that Congress would order an audit, which would be a way, essentially, of applying pressure,” he said.
The Fed also faces scrutiny in the Senate. Banking committee chairman Christopher Dodd, a Connecticut Democrat, is sponsoring legislation to strip it of authority to supervise banks and protect consumers.
Representative Mel Watt, a North Carolina Democrat, said Paul “found a good political time to try to do this because everybody is somewhat disenchanted with the Fed.” Watt was among those opposing Paul’s proposal when it passed the House Financial Services Committee.
Watt said he hopes that if and when the House bill on financial regulation is merged with a Senate version, “we’ll find our way back to a better” approach than Paul’s to dealing with Fed scrutiny.
Paul’s plan faces resistance in the Senate. Senator Judd Gregg, a New Hampshire Republican, vowed to block any measure containing it.
During his 11 House terms, Paul has introduced legislation to abolish the Fed six times and to conduct the audits three times. Until now, none was even debated in committee.
“I’ve been speaking and writing on this subject for more than 30 years, but there was a time when hardly anyone cared what I had to say,” Paul wrote in his latest book “End the Fed.” “The economic crisis has changed everything.”
Paul, who ran for president in 1988 as the Libertarian Party candidate, also advocates a return to linking the dollar to gold.
Representative Brad Sherman of California, a Democrat who supported Paul’s amendment in the Financial Services Committee, said his position isn’t an endorsement of Paul’s broader views.
“If you left it up to Ron, he’d convert the Fed building into residential condos.” Sherman said. “His amendment is far less radical than his rhetoric.”
Financial Services panel chairman Barney Frank, a Massachusetts Democrat, said the Fed’s failure to place compensation restrictions on AIG, the insurer bailed out by the U.S. government and later vilified by Congress over bonus payments, fueled momentum for Paul’s amendment.
Paul’s stance on many issues goes beyond the Republican mainstream. He has proposed scrapping the income tax and sees no federal role in education or health care. He opposed the Iraq war and the Patriot Act, which gave law enforcement greater latitude to investigate terrorism.
“I am very, very confident that theof freedom and limited government and non-interventionist foreign policy is the right way to go, and I think people like to hear that,” Paul said.
A retired obstetrician, Paul practices what he preaches. He refuses his congressional pension and didn’t allow his five children to take federal student loans.
Paul’s views drew enthusiastic crowds during his 2008 presidential bid, in which his campaign treasury outpaced higher-profile candidates. Paul raised $34.5 million, more than double that collected by now-Vice President Joe Biden in the Democratic presidential race.
Paul said that while his audit proposal has advanced beyond his expectations, he doesn’t see smooth sailing ahead.
“I just can’t imagine the president being allowed to sign a bill like that,” he said. “He would hear too much about it.”