SPEECH OF
HON. RON PAUL
OF TEXAS
IN THE HOUSE OF REPRESENTATIVES
Thursday, November 4, 1999
1999 Ron Paul 113:1 Mr. PAUL.
Madam Speaker, today we are
considering a bill aimed at modernizing the financial
services industry through deregulation.
It is a worthy goal which I support. However,
this bill falls short of that goal. The negative
aspects of this bill outweigh the benefits. Many
have already argued for the need to update
our financial laws. I would just add that I agree
on the need for reform but oppose this approach.
1999 Ron Paul 113:2 With the economy more fragile than is popularly
recognized, we should move cautiously
as we initiate reforms. Federal Reserve Board
Chairman Alan Greenspan (in a 1997 speech
in Frankfurt, Germany and other times), Kurt
Richebacher, Frank Veneroso and others,
have questioned the statistical accuracy of the
economy’s vaunted productivity gains.
1999 Ron Paul 113:3 Federal Reserve Governor Edward Gramlich
today joined many others who are concerned
about the strength of the economy when he
warned that the low U.S. savings rate was a
cause for concern. Coupled with the likely decline
in foreign investment in the United
States, he said that the economy will require
some potentially “painful” adjustments — some
combination of higher exports, higher interest
rates, lower investment, and/or lower dollar
values.
1999 Ron Paul 113:4 Such a scenario would put added pressure
on the financial bubble. The growth in money
and credit has outpaced both savings and
economic growth. These inflationary pressures
have been concentrated in asset prices, not
consumer price inflation — keeping monetary
policy too easy. This increase in asset prices
has fueled domestic borrowing and spending.
1999 Ron Paul 113:5 Government policy and the increase in
securitization are largely responsible for this
bubble. In addition to loose monetary policies
by the Federal Reserve, government-sponsored
enterprises Fannie Mae and Freddie
Mac have contributed to the problem. The
fourfold increases in their balance sheets from
1997 to 1998 boosted new home borrowings
to more than $1.5 trillion in 1998, two-thirds of
which were refinances which put an extra
$15,000 in the pockets of consumers on average
— and reduce risk for individual institutions
while increasing risk for the system as a
whole.
1999 Ron Paul 113:6 The rapidity and severity of changes in economic
conditions can affect prospects for individual
institutions more greatly than that of the
overall economy. The Long Term Capital Management
hedge fund is a prime example. New
companies start and others fail every day.
What is troubling with the hedge fund bailout
was the governmental response and the increase
in moral hazard.
1999 Ron Paul 113:7 This increased indication of the government’s
eagerness to bail out highly-leveraged,
risky and largely unregulated financial institutions
bodes ill for the post S. 900 future as far
as limiting taxpayer liability is concerned.
LTCM isn’t even registered in the United
States but the Cayman Islands!
1999 Ron Paul 113:8 Government regulations present the greatest
threat to privacy and consumers’ loss of
control over their own personal information. In
the private sector, individuals protect their financial
privacy as an integral part of the market
process by providing information they regard
as private only to entities they trust will
maintain a degree of privacy of which they approve.
Individuals avoid privacy violators by
“opting out” and doing business only with
such privacy-respecting companies.
1999 Ron Paul 113:9 The better alternative is to repeal privacy
busting government regulations. The same approach
applies to Glass-Steagall and S. 900.
Why not just repeal the offending regulation?
In the banking committee, I offered an amendment
to do just that. My main reasons for voting
against this bill are the expansion of the
taxpayer liability and the introduction of even
more regulations. The entire multi-hundred
page S. 900 that reregulates rather than
deregulates the financial sector could be replaced
with a simple one-page bill.
Note:
1999 Ron Paul 113:7
highly-leveraged probably should be unhyphenated: highly leveraged.
1999 Ron Paul 113:9
privacy busting probably should be hyphenated: privacy-busting.
