Sen. Rand Paul, R-Ky., who already has called several times for a full audit of the Federal Reserve, the quasi-public organization that largely controls U.S. monetary policy, now is tying his effort to Obama's nominee to the Fed chairmanship.
Paul, whose father, former congressman Ron Paul, sought for years an audit of the Fed, confirmed Friday that as "part of Senate consideration of the Janet Yellen nomination to be chair of the Fed," he will ask for a positive response to his "Transparency Act."
The Fed's current chairman, Ben Bernanke, is expected to step down Jan. 31. Yellen now is the vice chairman.
She needs Senate confirmation, however, and now the senator is linking her prospects to garnering more information about the Fed, which largely has operated behind a screen of secrecy since it was created almost 100 years ago.
While Democrats, who presumably would support their president's choice, are a majority in the Senate, it would require 60 votes to break a senator's hold on a candidate. So such a move would require support from at least a handful of Republicans.
The senator's statement said, "The American people deserve transparency from the Federal Reserve and the federal government as a whole."
Ron Paul said in an interview with John Stossel on the Fox Business Network that the Federal Reserve has extraordinary power, and Americans at least should be informed of what it's doing.
He said the Constitution requires that the U.S. monetary system be based on gold and silver, not the fiat currency currently issued.
"No secret cabal … should have the authority to create money out of thin air, because they will," he said.
He said the Fed builds a bubble in the economy and takes credit for raising the money involved in, for example, the housing industry. Then when a bust takes place, the Fed pumps more money in and takes credit for trying to create a recovery.
The Federal Reserve, in fact, has an ongoing program to simply create money, buying up to $85 billion in bonds each month to stimulate the U.S. economy.
The bottom line, Ron Paul said, is that such actions inevitably hurt the middle class, injure the poor and create more money for the wealthy.
"The middle class is getting wiped out," he said.
It was former Fed chairman Alan Greenspan who admitted, also in an interview this week, that the experts knew there was a bubble in the economy just before the market crashed in 2008.
He said the episode convinced him that there was something "fundamentally wrong" with the way he was looking at the economy.
See Ron Paul's comments:
And see Greenspan:
Sen. Rand Paul has followed in his father's footsteps, introducing an audit-the-Fed bill to Congress, where a similar plan previously passed the House.
Rep. Paul Broun, R-Ga., was a staunch ally of Rep. Ron Paul's legislation to audit the Fed and sponsored a bill identical to the one that easily passed the House in the 112th Congress.
"I'm an original intent constitutionalist, as was Ron Paul while he was here," Broun told WND. "We should audit the Fed. Hopefully we get rid of the Fed, and I introduced a bill to do that also."
Broun said it's remarkable that the public knows virtually nothing about an institution with so much power over the economy.
"Congress has basically abdicated its duty to control money and the monetary supply and control of our money supply as a nation over to this semi-governmental agency that's not really governmental," he said. "In reality, we have had no auditing. We have absolutely no idea what they're doing over there.
"We've had this quantitative easing now into the third time, which has been totally unproductive in trying to get our economy going. The Fed housing policy was part of the reason we had the housing bubble and crash. They're still managing our monetary supply. They're creating more and more dollars that have no or very little value behind them. Our dollars are becoming worth less and less. As time goes on, they're going to be worthless."
Broun said it's "absolutely critical that we audit the Fed so the American people can see what's going on over there."
"Do it from top to bottom so that we can have transparency in this entity called the Federal Reserve," he said. "Hopefully, the American people will see that we need to go back to the gold standard, which I've introduced, and get rid of the Fed."
Some of Ron Paul's concerns about the Federal Reserve were based on Article 1, Section 8 of the Constitution, which assigns to Congress the right to coin money.
There is no mention in the Constitution of a central bank, and it wasn't until the Federal Reserve Act of 1913 that the Fed was created.
Ron Paul previously has said: "Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar. Since 1913 the dollar has lost over 95 percent of its purchasing power, aided and abetted by the Federal Reserve's loose monetary policy."
He proposed repeatedly the idea of auditing the Fed to determine exactly what it has been doing and then begin making corrections. With a book titled "End the Fed," he's made no secret of his ultimate goal.
That the Fed is at least partly to blame for the financial problems that have developed in the U.S. seems not to be in dispute.
It was longtime Fed Chairman Bernanke who admitted as much.
Bernanke said it was the Fed that caused the Great Depression. It was the longest and worst depression ever experienced by the industrialized Western world. While originating in the U.S., it ended up causing drastic declines in output, severe unemployment and acute deflation in virtually every country on earth.
At a Nov. 8, 2002, conference to honor economist Milton Friedman's 90th birthday, Bernanke, then a Federal Reserve governor, gave a speech at Friedman's old home base, the University of Chicago.
After citing how Friedman and a co-author documented the Fed's continual contraction of the money supply during the Depression and its aftermath – and the subsequent abandonment of the gold standard by many nations to stop the devastating monetary contraction – Bernanke said:
Before the creation of the Federal Reserve, Friedman and [Anna] Schwartz noted, bank panics were typically handled by banks themselves – for example, through urban consortiums of private banks called clearinghouses. If a run on one or more banks in a city began, the clearinghouse might declare a suspension of payments, meaning that, temporarily, deposits would not be convertible into cash. Larger, stronger banks would then take the lead, first, in determining that the banks under attack were in fact fundamentally solvent, and second, in lending cash to those banks that needed to meet withdrawals. Though not an entirely satisfactory solution – the suspension of payments for several weeks was a significant hardship for the public – the system of suspension of payments usually prevented local banking panics from spreading or persisting. Large, solvent banks had an incentive to participate in curing panics because they knew that an unchecked panic might ultimately threaten their own deposits.
It was in large part to improve the management of banking panics that the Federal Reserve was created in 1913. However, as Friedman and Schwartz discuss in some detail, in the early 1930s the Federal Reserve did not serve that function. The problem within the Fed was largely doctrinal: Fed officials appeared to subscribe to Treasury Secretary Andrew Mellon's infamous "liquidationist" thesis, that weeding out "weak" banks was a harsh but necessary prerequisite to the recovery of the banking system. Moreover, most of the failing banks were small banks (as opposed to what we would now call money-center banks) and not members of the Federal Reserve System. Thus the Fed saw no particular need to try to stem the panics. At the same time, the large banks – which would have intervened before the founding of the Fed – felt that protecting their smaller brethren was no longer their responsibility. Indeed, since the large banks felt confident that the Fed would protect them if necessary, the weeding out of small competitors was a positive good, from their point of view.
In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn. …
History records that in 1913 President Woodrow Wilson approved the Federal Reserve Act but later reflected that his actions "unwittingly ruined my country."
Wilson said that since the U.S. system of credit is concentrated in the hands of a few, "we have become … one of the most completely controlled and dominated governments in the civilized world."
Ron Paul was named WND's "Man of the Decade" for his work on the audit plan and other efforts.