This week marks the conclusion of Federal Reserve Chairman Ben Bernanke’s four-part lecture series on how the central bank “saved the economy” to undergraduate students at the George Washington University School of Business.
At this point, you almost have to feel sorry for Ben Bernanke. He is engaged in a desperate propaganda tour to convince the public that the Fed prevented a “total meltdown” of the U.S. economy. Thankfully, most Americans aren’t buying it.
The Fed’s new public relations campaign proves that it’s finally on the defensive. The central bank is feeling the pressure of accountability. It’s about time. The Fed has largely operated in secrecy since its inception in 1913.
Just a few short years ago, most Americans were unaware of the Fed despite its immense power to control the value of the dollar. But things have changed quite a bit, much to the central bank’s chagrin. Congressman Ron Paul deserves credit for exposing the Fed as the real culprit in the financial meltdown.
At this point, Ben Bernanke is doing whatever he can to save face. He has a lower approval rating than Congress. You can’t get much lower than that.
This is not Bernanke’s first attempt to create a façade of Federal Reserve transparency. The Fed held its first-ever press conference back in April 2011. Don’t be fooled, the press conference was only a hoax for the Fed to appear more transparent and boost its own public image.
The last thing Bernanke wants is for the American people to find out what’s really going on behind closed doors, but it’s doubtful that Bernanke can keep his smoke-and-mirrors act going for much longer. A whopping 80 percent of Americans want a comprehensive audit of the Fed, according to Rasmussen polls.
Americans are losing trust in the central bank for good reason. The first-ever audit of the Fed in June 2011 revealed that at the height of the financial crisis it gave out $16 trillion in secret loans to corporations and banks around the world. That gigantic number is equal to 113 percent of the United States’ gross domestic product. These massive bailouts occurred without congressional approval. The unelected bureaucrats at the Fed fought tooth and nail to keep these bailouts hidden from Americans, but ultimately lost.
There still hasn’t been a comprehensive audit of the Fed. The summer 2011 audit conducted by the Government Accountability Office was one-time and limited. Investigators were not allowed to peer into the Fed’s deliberations on interest rates. Could $16 trillion in secret bailouts be just the tip of the iceberg? We won’t know with any certainty until we have a true audit of the Fed.
Until then, any attempt by the Federal Reserve to repair its damaged credibility is destined for failure. And for good reason. Why would anyone trust Bernanke to fix the economy when he kept multitrillion-dollar bailouts secret and did not even see the housing market crash coming? In a rare interview with CNBC reporter Maria Bartiromo in July 2005, Bernanke revealed just how oblivious he was to the economic situation at the time.
Maria Bartiromo: “Tell me, what is the worst-case scenario? We have so many economists coming on our air saying ‘Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.’ Some say it could even cause a recession at some point. What is the worst-case scenario if in fact we were to see prices come down substantially across the country?”
Ben Bernanke: “Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.”
Boy, was he wrong. The economic crisis should have shocked no one. Ron Paul had been warning about a financial crisis created by the Fed on the floor of the House of Representatives for many years before it happened.
During a speech on September 10, 2003, Congressman Paul said that “the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions … like all artificially created bubbles the boom in the housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out.”
Ron Paul didn’t have a crystal ball. He just understands how the Fed creates business cycles, regularly occurring booms and busts in the economy.
The American people aren’t falling for the Fed’s propaganda, and the truth is winning. Ben Bernanke has no business trying to teach anyone anything about the economy. Maybe he should take a class from Ron Paul on how the Fed creates financial chaos and destroys the purchasing power of the dollar instead.
Julie Borowski is a policy analyst for FreedomWorks and an independent blogger on economic issues.