Guest Post: Economist With Financial Services Committee For Eleven Years, Assisting With Oversight Of The Fed, May Lend Some Support to Ron Paul’s Questions

Preface: When I first heard Ron Paul’s questions to Bernanke today, I thought he had totally lost it.  Even with the information conveyed below, I don’t want to make it sound like a proven conspiracy.  I am solely providing background.

Today, Ron Paul accused the Federal Reserve of having a hand in nefarious plots such as Watergate and arming Saddam Hussein.

A 1992 article in the Los Angeles Times reports that the Fed had only a minor, indirect role in providing loans to Saddam (it was mainly the Department of Agriculture which made the loans, with backing from the State and Treasury Departments).  The Times article also appears to say that most of the government officials involved thought that Saddam would use the loans for humanitarian purposes, and paints the Fed as the most reluctant of the involved agencies.

However, in 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.

You can read details of Auerbach’s allegations about Iraq here, and about Watergate here.

Moreover, a 1982 article from the Miluawakee Sentinel alleges:

Police who searched the room the Watergate burglars used found $4,200 in $100 dollar bills, all numbered in sequence. [Senator] 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 [from the Federal Reserve] in years. They ducked, misled, lied, and gave me the idiot treatment.”

I don’t yet have an opinion as to what this means, whether Auerbach has his facts right, or whether his allegations – if true – really amount to proving that the Fed had a major role in arming Saddam or stonewalling Congressional investigators about Watergate.

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George Washington is the head writer at Washington’s Blog. A busy professional and former adjunct professor, George’s insatiable curiousity causes him to write on a wide variety of topics, including economics, finance, the environment and politics. For further details, ask Keith Alexander…


  1. Fu

    After Bernanke said “We have no plans to be involved in any foreign bailouts or anything of that sort… You’d know about it.”, Ron Paul should have asked him about the currency swaps the the Fed did.

  2. Aaron

    funny you should bring this up. I had a discussion on a forum earlier today about this that was very similar. :)

    However, I used this article from Auerbach in the Huffington Post:

    and this section from the Senate Watergate Report about the federal reserve:

    Regardless of whether Ron Paul’s allegations are true or not, this is some interesting stuff and I learned quite at bit of new information today. If more people become aware the information in Auerbach’s book or that HP article for the first because of his comments today, then I’d say it was worth it.

    Oh, and as a UT alumnus, HOOK ‘EM!

  3. John

    I think the point of Ron Paul’s questions today was that we don’t know what the Fed is doing because they won’t effing tell us. And that’s BS.

    I found it curious when Bernanke said that all Fed agreements and contracts more than 10 years old are now public knowledge. Does the Fed have a policy to make all agreements that are more than 10 years old public? That just seemed like a bald-faced lie to me and I was surprised Bernanke was so sure in his answer. Methinks someone out there is going to catch him in some lies emanating from today’s testimony.

    I was also a little ticked when Bernanke characterized Paul’s questions as ‘bizarre’. After all the secret BS the Fed has engaged in, no question to them is ‘bizarre’.

  4. cswake

    John, to take your comments one step further…

    Paul’s questions today demonstrated that not only do the American people not know what the Fed is presently doing or has done in the past, but neither does Congress since they don’t actually do any inquiries into the Fed. It seems a lone Congressman like Paul, or Gonzalez, can’t do the job alone.

    I can only conclude that the worded response by Bernanke and the chuckles by the members of the House Financial Services Committee were intended to marginalize him. (Ignorance of stuff like this is not an excuse for elected representatives)

  5. Jack Parsons

    Hermm. It is more likely that US intelligence has its little plants inside the Fed to do “interesting” things, just like they have them everywhere else. And there are many competing factions controlling these plants.

  6. jake chase

    Gee, corruption and conspiracy at the Fed? I am shocked, shocked. What did the Congress expect when it bought the Morgan-Rockefeller scheme, hook, line and sinker?

    Well, it’s not Federal, and there are no Reserves, but at least it is a System.

    Time for that Constitutional Convention. Ron Paul may have only one idea but at least it’s a good one.

  7. Mark G.

    Allowing $5.5 billion to be sent to Saddam Hussein from a small Atlanta branch of a foreign bank

    BNL bank I presume. BNL had many dealings with the Bank of Crooks and Criminals International or the BCCI. Wonder if the Fed had any dealings with BCCI?

  8. spinnikerca

    Of course it isn’t a proven conspiracy. How can it be when the Fed stonewalled everyone? The point Ron Paul was making was not about Watergate, nor about Saddam. The point was about historic AND current lack of transparency at the Fed.

    It is outrageous that these questions still are unanswered, one way or the other. We should KNOW they aren’t true, if we had any real transparency at the Fed, at all.

    Audit the Fed under HR 1207 and S 604.

  9. radicalized

    Yves, It is about time you did an article on Ron Paul. Is he right on his overall approach or is he a nutcase. The media focuses on Sara Palin as a diversion from the importance of Ron Paul’s attempts to fix the economy, especially the monetary system. Since he is the only member of the senate that seems to understand the situation, I think he deserves some recognition on this blog. After all, there is a great deal of outrage on this blog every day. How about focusing on the one senator that is trying to bring about real change.

    1. eric anderson

      Er, he’s a Congressman. But no matter. As previous poster said, Ron Paul may have only one idea, but it’s a good one.
      (Actually he has two ideas. Audit/end the Fed, and reduce the Federal government drastically.)

      I rather think questions about Watergate or Saddam are distractions. He could have asked about more contemporary suspected conspiracies.

      I hope his CPAC straw poll win doesn’t go to his head.

  10. dilbert dogbert

    A time line for all this with info on who was in the whitehouse and who controlled the house and senate.

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