On February 24, Congressman Ron Paul (R-Texas), at a hearing held by the House Financial Services Committee, asked Federal Reserve Chairman Ben Bernanke whether he was aware of allegations that the Federal Reserve had been complicit in the Watergate cover-up and in the illegal funneling of billions of dollars in loans to Iraq’s Saddam Hussein:

"It has been reported in the past that during the 1980s that the Fed actually facilitated a $5.5-billion loan to Saddam Hussein. And he then bought weapons from our military-industrial complex. And also that is when he invested in a nuclear reactor....

"Also there's been reports that the cash used in the Watergate scandal came through the Federal Reserve. And when investigators back in those years tried to find out, they were always stonewalled, and we couldn't get the information.... Would you grant that after 10 or 15 years, the American people deserve to know?"

Chairman Bernanke, caught off guard, replied that he found such allegations “absolutely bizarre,” adding that “I have absolutely no knowledge of anything remotely like what you just described. As far as the 10 years, after five years, we produce complete transcripts of every word said in the FOMC meetings. So you have every word in front of you.”

The unexpected exchange caught the momentary attention of the political punditry. Blogs from the Wall Street Journal to NPR made incredulous note of it, while the Huffington Post called Congressman Paul’s allegations “wild accusations.” The consensus among the opinion cartel, to the extent that they deigned to take notice of the episode at all, was that the February 24 sparring was just another irresponsible outburst from Congressman Paul, Capitol Hill’s crazy uncle. Case closed.

Undismayed, Congressman Paul the following day produced documentation for insertion into the Congressional Record to substantiate his allegations of the previous day. His source was none other than Dr. Robert D. Auerbach, a professor at the LBJ School of Public Affairs at the University of Texas and author of Deception and Abuse at the Fed (University of Texas, 2008). Professor Auerbach was also an economist with the House of Representatives Financial Services Committee during the tenures of four Fed Chairmen, from Arthur Burns through Alan Greenspan. Congressman Paul cited a letter he had received from Auerbach thanking him for bringing to light long-neglected facts about the Federal Reserve’s shady past. In his letter, Professor Auerbach rehearsed evidence from his book (some of which was culled from actual minutes of meetings by Fed officials) that the Fed had misled investigators about the source of the $6,300.00 in cash found on the persons of the burglars apprehended at the Watergate break-in. Wrote Auerbach:

"The Federal Reserve under the chairmanship of Author Burns not only kept the Fed from getting entangled in the Watergate coverup, which the Fed’s actions had assisted, it allowed false statements about bills the Fed knew were issued by the Philadelphia Fed Bank to stand uncorrected. Blocking information from the Senate and House Banking Committees … and issuing false information during a perilous government crisis imposed huge costs on the public that had insufficient information to hold the Fed officials accountable for what they had withheld from the Congress. Had the deception been discovered the Fed chairmen following Burns may have been forced to rapidly implement some real transparency to restore the Fed’s credibility. That would have reduced or eliminated many of the lies, deceptions, and corrupt practices that are described in my book."

Professor Auerbach went on to discuss the shady dealings of one Christopher Drogoul, the manager of the Atlanta branch of the Banca Nazionale del Lavoro (BNL), who, beginning in 1986, became the middleman for a scheme to funnel billions of dollars to Saddam Hussein to support his war against Iran. The loans, supposedly authorized by the U.S. Department of Agriculture and guaranteed by the U.S. government, were of very dubious merit, since Iraq was not deemed credit-worthy. Yet Federal Reserve auditors of the BNL seem to have completely overlooked billions of dollars of very risky loans on BNL-Atlanta’s books during a cursory audit that took only a day and a half. While criminal complicity on the part of Fed officials was never proven, the exchange of lavish gifts between officials at the New York Fed and the main American branch of BNL in New York City suggested a level of complicity never fully acknowledged or explained by investigators and prosecutors.

Thus Congressman Paul’s allegations, surprising though they were, were anything but bizarre. The Congressman also asked Bernanke whether the Fed (given its alleged history of facilitating under-the-table loans of deadbeat regimes) had any plans to assist in a bailout of Greece; Bernanke denied that it did.

The most deceptive claim by Fed officials has always been that the American central bank is, and must always remain, aloof from politics — hence Bernanke’s opposition to a congressional audit of the Fed. But the sordid truth has always been that bankers, and most especially central bankers like Bernanke, are often motivated by political allegiances and biases. Federal Reserve chairmen like Bernanke understand as well as everyone else at the apex of the financial pyramid the importance of patronage and playing ball with politicos. They differ only in having a freer hand than most to manipulate the system to serve their own ends.

Photo of Ben Bernanke: AP Images

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Bonnie said:

The big money Establishment... would like to do to Ron Paul what their predecessors did to Joe McCarthy. There have already been attempts. They see Ron Paul as a threat and will do whatever is necessary to discredit him.

March 06, 2010

Thomas Paine said:

Paul vs. Bernanke Gee, I wonder which one is more credible? Should I believe the Constitutionalist Ron Paul, or the unconstitutional private Federal Reserve Chairman Bernanke. That's a tough one. Well I know our Homeland Security chief Napolitano would certainly recommend the esteemed Bernanke, since, you know, those constitutionalists are terrorists.

March 06, 2010

Still Free said:

Hooray for Ron Paul There is nothing quite as beautiful as a man of principle--except a man of principle speaking the truth. Thank you, Ron Paul, for setting the record straight.

March 07, 2010

Rosco1776 said:

Shadows I fear there will never be enough light shed on the fed to show it's shadowy past! Keep up the good work Dr. Paul. "I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." Thomas Jefferson

March 07, 2010 | url

Lee Gonzales said:

"Moneyed aristocracy" Dr.Paul just keeps on confronting and questioning the Chairman of the Federal Reserve, Ben Bernanke, who is one of todays moneyed aristocrats as Thomas Jefferson called them. Thomas Jefferson said that these banking men would pose a greater danger than a standing army. And "standing armies" were entities the Founders feared! What Jefferson proposed was to close down their bank and not allow any "moneyed aristrocracy" from taking control of the nation's money. The Treasury Department is in essence in my opinion, an agency of the "moneyed aristocracy." The question is how do we break the hold of the "moneyed aristocracy" on our nation? One of the things to do is for Congress to end the Fed. Will congress allow a true audit of the Fed with HR1207? In my opinion,at this time they won't. Not until more people like Ron Paul are elected to Congress,But if we do get 75 to 100 Congressmen elected with the dogged determination to expose the "moneyed aristocracy" with an audit and a full-blown congressional investigation of the central bank, we will be well on our way to restoring our beloved republic. Dangerous times, but exciting times nonetheless!

March 07, 2010

ponomo said:

... Demand your State department of Education (Public), the one who dictates what is taught in government schools,to teach our young ones that The Federal Reserve is a "private corporation." Look up Federal Reserve on Dun & Bradstreet---you will be provided with The New York Fed branch. What is wrong with teaching the truth?

March 07, 2010

Ben Bernake said:

Be Nice! Hey, be Nice! I'm probably going to have a very violent end, in the end. Riotous crowds have already taken notice of those lightpoles on Constitution avenue.

March 07, 2010

Thomas said:

... Oh yeah, Bizzare.....MMMMMMMMMM No one seems to mention those "agricultural products" the BILLIONS $$ "loans" purchased were chemicals which were easy, almost idiot proof ingredients to make chemical weapons. Bingo...

March 07, 2010 | url

Tim said:

good article I like the term "opinion cartel" the author uses. What a great way to describe the squawkers within the mainstream media. I'm going to start using this phrase.

March 08, 2010

Travlyr said:

"Opinion Cartel" I like that term too. Dr. Paul needs all the help he can get, so I'll use that term when I can. Another term recently suggested to me is, "War Economy." We have had relentless wars since the inception of the Fed, and they have created the destructive war economy and it's now failing.

March 08, 2010

Bonnie said:

War Economy Stop and think about that term --- "war economy". Talk about your oxymorons! War is characterized by waste and destruction. Economy is an efficient use of resources. War can never be economical!

March 08, 2010

Blonduxo said:

... Yeah so "opinion cartel" is cool. What is not is the comment ..."just another irresponsible outburst from Congressman Paul, Capitol Hill’s crazy uncle. Case closed." Please hold the condescension, the insult, the lack of respect, the personal attack, the politics of personal destruction. Isn't it about time you acknowledge that this is the man who should be president? This is the man who can lead us out of the wilderness? This is the man, with the message, with the movement who can instill hope and faith again and deliver true change. Read, learn, fill your self up with liberty, and then go to work. First they ignore you. Then they laugh at you. Then they fight you. Then you win.~ Mahatma Ghandi

March 09, 2010

DB said:

@Blonduxo regarding "Capitol Hill's crazy uncle" Hopefully you aren't insinuating that the author of this article was actually saying this - I would suggest you re-read the entire paragraph in which that phrase was written. Ron Paul is not the only hope, but he is the biggest beacon in the liberty movement, to be sure. Which is why the author threw that phrase in along with the "Opinion Cartel" section of his piece - I would certainly say that this fellow is all for Ron Paul's chink-in-armor approach to the Fed and wants to see that dirty parasite-feeding organization steamrolled as much as any of us do. Cheers!

March 09, 2010

Jerry said:

American SO What! Greedy American`s only know what`s going on in their own little world...they`re too ignorant to know anything else. As long as American have the things they want they don`t even care if their country falls apart around them..as long as they have the things they want...."Land of the Free","Home of the Brave"...you`ve got to be kidding!!American`s have turned out to be the most cowardly,and self serving idiots on earth. Just ONE (1) Iranian Woman protesting in the streets,bare handed, has more Balls than all of America put together. Three of the most horrible people on the planet are making you - Squirm in Fear -,and what do the Americans do?...They Hide with all of the things they love more than country..their cell phone,lap top,car,and those low riding pants,and silly little hat`s your Jitter Bug teen`s think are soooo cool. I think if you American`s have enough time you can TALK you enemies into submission...your enemies in DC that is...the one`s you voted into office...YOU VOTED INTO OFFICE...YOU made you path...now you have to walk,or,Talk it in you case...good luck Dumb Asses.The world is watching you....holding their sides in laughter.....Please!! just one more time;tell us how wonderful and Brave you are....it`s very funny LMAO!!

March 09, 2010

Keith said:

What You may wish to remember what Hirohito said after Pearl Harbor "I am sorry my friend (speaking to XO) I fear we have done nothing more than to awaken a sleeping Tiger" laugh if you want. Another gentleman once said that "there is a rifle behind every blade of grass" "Bring it"

March 09, 2010

Mitchina said:

Criminals in WA Every single criminal that was ever sat at the stand of a court of law has lied! 90% of politicians are exactly that same criminal sitting in the chair, lying. It is inbred in them so we must charge them and get them out of our government for the people. And now? Now they are coming right out and boldly spouting off about being "progressies", which in my hearnt & mind is the same as being a communist.

March 10, 2010

katie said:

... Not to be a jerk here and I agree on getting rid of the fed but since its inception in 1913, why has it not been repealed? Other than Ron Paul and maybe a couple others, I don't understand why there hasn't been a movement to rid them years and even decades ago? Curiously, why now , after $13 or so trillion?

March 12, 2010