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Ron Paul Questions Dr. Meltzer and Dr. Galbraith on Federal Reserve Transparency - 7/9/2009

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[Rep Mel Watt (D-NC) Chairman of the Domestic Monetary Policy and Technology Subcommittee] WATTS: I got to be out of here by 5 o’clock, there is another meeting then. I recognize the gentlemen from Texas, Mr. Paul, for 5 minutes. [Rep Ron Paul (R-TX)]: Thank you Mr. Chairman and I welcome the panel. It's especially nice to see Dr. Meltzer here. I would like to start with a question for Dr. Meltzer because I wanted to follow up on his testimony about the Latin American crisis, where he mentioned that the Federal Reserve went to the IMF and instructed the IMF to pay interest to those banks that were exposed. And of course, that was without Congressional permission, and I think it makes a point, one of the points I've been trying to make and that is transparency of the Federal Reserve. Now it sounded to me like the majority here is for independence, which is a code word for secrecy, and in opposition to transparency, and it's always used for the public interest. Of course I think the public interest is served by exposure, and knowing what's going on, and whose interests are being served, and that's why I would like to see a lot more transparency. But the question I have for Dr. Meltzer is, since he's aware of this, he's published this.... Is this a good reason for us to know a lot more about the agreements that the Federal Reserve makes? Because they can make agreements with international banking institutions and we have no right... We may have a right under the Constitution that we should, but we've given up that right and we've given up that privilege..... Would this be a good example of why we need to know more of why we need to know more exactly what the Federal Reserve is doing? DR. ALLAN MELTZER: Yes, let me begin by saying, independence to me, and I believe to many other members of the panel, does not mean lack of transparency; it means protection. The reason we have independent central banks is so that they don’t expand under pressure from Congress, from the administration, from the banking community and from others. We want them to be independent to make their judgment because they are obligated by law to maintain high employment and low inflation. Now, that law doesn’t work very well, at least in my opinion. But that’s why we want independence. So transparency? How can you be against transparency? But I believe the Congress would be more effective in its over sight of the Federal Reserve if it concentrated much more on outcome and much less on process. Let them make their decisions the way they want to make them. Monitor the process. They are not living up to the mandate to maintain full employment or high employment and low inflation, and that’s what we should be concerned about. PAUL: I thank you, and I’m going to hurry along because our 5 minutes run past rather quickly. But I wanted to ask Dr. Galbraith a question because he’s worked here and he knows the system, so I’ve been rather shocked with what he presented here. You actually talked about the Constitution and then you find out that you’re not supposed to do that around here. We don’t have that much concern about. So I was delighted from my viewpoint that you brought this up and reminded us about Henry Reuss‘ concern about the constitutionally of FOMC [Federal Open Market Committee]. And of course I agree with that. But I wanted to see if there was a little bit more that you might agree with, because there are some who believe that we shouldn’t be doing anything unless it’s explicitly authorized. And, of course, the Central Bank is not authorized. It’s been ordained by the courts and the Congress, but it was never explicitly authorized. But the more practical point I might be able to get your comment on is the concept of the budget. I mean, the Fed is a government onto itself. You know, they hire and make their wages, and it doesn’t go through the ordinary process. The Constitution says it should all go through the constitutional process. And also maybe may be you could comment on the foreign agreements; these are like treaties. The Federal Reserve goes and makes these agreements and they pass out money. Does this strike you that maybe that too might be challenged if you happen to come at this from a constitutional viewpoint? DR. JAMES GALBRAITH: Well, I think under the Constitution the Congress has every right for whatever information it seeks from the Federal Reserve. And if the Congress were to decide to change the way the Federal Reserve is funded it also have a right to do that. It seems to me it would be an appropriate decision for Congress to make. PAUL: So they would then have a right… so my proposal that we find out more.. you would say that would be right and proper to find out what kind of agreements they’ve made with other governments, other central banks, or international banking institutions? GALBRAITH: My own view on this is that as a member of Congress you’re entitled to that information. That would be the position I understood be the case when I was working here 30 years ago. PAUL: Thank you.

Video Details

Duration: 5 minutes and 16 seconds
Country: United States
Language: English
Producer: KramerDSP
Director: KramerDSP
Views: 124
Posted by: kramerdsp on Jul 11, 2009

Ron Paul Questions Dr. Meltzer and Dr. Galbraith on Federal Reserve Transparency - 7/9/2009

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