Rep. Paul Pushes Fed To Be More Transparent

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Rep. Ron Paul (R-TX) has some definite views about the Federal Reserve. Paul published a book last year called End the Fed. Beginning in January, he'll be chairman of the House subcommittee that oversees the Fed. David Wessel, economics editor of The Wall Street Journal, talks to Don Gonyea about the future of the Federal Reserve.

DON GONYEA, host:

When Republicans take over the House next year, the change may increase the political pressure on the Federal Reserve. Texas Republican Congressman, Ron Paul, will lead the House subcommittee that overseas the Fed. Among the reasons that is notable, is that Ron Paul is the author of a book called "End the Fed."

We are going to talk about that with David Wessel of the Wall Street Journal. David, good morning.

Mr. DAVID WESSEL (Economics Editor, The Wall Street Journal): Good morning, Don.

GONYEA: So broadly speaking, how much unhappiness is there with the Fed in this new Congress?

Mr. WESSEL: Well, I think that there's a lot of unhappiness Among the public with the Federal Reserve. A lot of Americans think, basically, the Fed bailed out Wall Street and it didn't bail out Main Street. There was a recent Bloomberg poll that found that 39 percent of those surveyed, believe the Fed should be held more accountable to Congress. And fully 16 percent wanted to abolish the Fed altogether.

So I think among many members of Congress, there's some reaction to this public animosity to the Fed, particularly among some of the newly-elected Tea Party Republicans.

GONYEA: Now we have Ron Paul, not newly elected, but he is in a new position of power. He spoke with NPR this week, and we will hear the full interview this weekend. But he started out by simply telling us that he wants more information.

Representative RON PAUL (Republican, Texas): The main thing I will do, to start off with, will be to continue the effort to at least get transparency of the Fed, to audit the Fed, to know what theyve been doing.

GONYEA: David, that sounds reasonable. Can the Fed comply?

MR. WESSEL: Well, Mr. Paul's already had substantial success in forcing the Fed to provide much more information about the emergency loans is made during the financial crisis. He failed in his effort, though, to pierce the Fed's independence. He wants the government accountability office to be able to go through and examine why they make decisions on interest rates, to kind of second guess the Fed on monetary policy. Ben Bernanke, the Fed Chairman, says that's a line that shouldn't be crossed because it would weaken the Fed's independence from politicians that's kind of inherent in the system.

GONYEA: Um hum, Ron Paul has also acknowledged that he does, indeed, have much larger ambitions. And here's how he described them to us.

Mr. PAUL: What I want to do is legalize gold and silver, which is the proper monetary system, and compete with the Federal Reserve. And I believe the Fed will eventually end itself, because they're working on a monetary system that is not viable.

GONYEA: OK, legalizing gold and silver - whats he talking about?

Mr. WESSEL: Basically, he wants to go back to an earlier era where gold and silver were legal tender, and where you could have your dollar bills exchanged for gold or silver at some fixed rate. It's an old system that's largely been discredited. Most economists - many Republicans in Congress think it's a little bit weird and extreme. And although he feels very strongly about it, it's unlikely to move into legislation or anything like that.

GONYEA: But how much support is there for that view?

Mr. WESSEL: I don't think there's very much support at all. There's kind of a romantic view that we could go back to something better. Maybe we'd have less chance of hyper inflation, but I think most people, most economists, and most members of Congress they want to have some control and accountability over the Fed, but they don't want to put it out of business and return to a gold standard; which, after all, was one of the reasons we had the Great Depression a generation, or two, ago. GONYEA: And could this amount to an uncomfortable couple of years for Ben Bernanke, the head of the Fed?

Mr. WESSEL: Well, I think there'll be a lot of good theater. Mr. Paul is wonderful to watch at a hearing. He sometimes says things that seem a little bit as Ben Bernanke put it, when hearing bizarre; like he suggested the Fed had financed Watergate and Saddam Hussein. So maybe Mr. Bernanke will look like the reasonable, sober guy against a somewhat unusual member of Congress. But Ron Paul is no longer someone the Fed can ignore, he has a lot of supporters. He's no longer a voice in the wilderness.

GONYEA: David Wessel is the economics editor of the Wall Street Journal. He is also the author of the book, "In Fed We Trust."

David, thank you.

Mr. WESSEL: You're welcome.

GONYEA: And Ron Paul spoke with NPR's Guy Raz. You can hear the full interview, Sunday, on NPR's ALL THINGS CONSIDERED.

This is MORNING EDITION from NPR News.

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