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2004 Ron Paul Chapter 7
Ron Paul’s Congressional website
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HON. RON PAUL OF TEXAS
BEFORE THE HOUSE FINANCIAL SERVICES COMMITTEE
February 26, 2004
The Financial Services Committees “Views and Estimates for 2005”
2004 Ron Paul 7:1
The Committee on Financial Services’ “Views and
Estimates for Fiscal Year 2005” begins by expressing concerns about the
long-term threat that record level of deficit spending poses to the
American
economy, and pledging to support efforts to reduce the deficit. Yet in
the rest
of the document the committee advocates increasing spending on both
foreign and
domestic welfare. The committee also advocates new regulations that
will retard
economic growth, as well as violate the Constitution and infringe on
individual
liberty.
2004 Ron Paul 7:2
This document claims that “investor confidence” was
boosted by the Sarbanes-Oxley Act, which imposed new federal
regulations on
capital markets, including mandating new duties for board members and
dictating
how companies must structure their boards of directors. One of
Sarbanes-Oxley’s most onerous provisions makes every member of a
company’s
board of directors, as well as the company’s chief executive officer,
criminally liable if they fail to catch accounting errors.
2004 Ron Paul 7:3
As investigative reporter John Berleau detailed in his
Insight magazine article (“Sarbanes-Oxley is a Business Disaster”), the
new
mandates in Sarbanes-Oxley have caused directorship, accounting, audit,
and
legal fees to double. In addition, the cost of directors’ liability
insurance
has almost doubled since Sarbanes-Oxley became law. Not surprisingly,
the impact
of these new costs hit small businesses especially hard — the
traditional engine
of job creation in America.
2004 Ron Paul 7:4
The costs of compliance with Sarbanes-Oxley divert capital
away from activities that create jobs. Yet the committee is actually
considering
imposing Sarbanes-Oxley-like regulations on the mutual funds industry!
Instead
of expanding the regulatory state, the committee should examine the
economic
effects of Sarbanes-Oxley and at least pass legislation exempting small
businesses from the law’s requirements.
2004 Ron Paul 7:5
The committee’s ‘Views and Estimates” gives an
unqualified endorsement to increased taxpayer support for the Financial
Crimes
Enforcement Network (FINCEN), while ignoring the growing erosion of our
financial privacy under the PATRIOT Act and similar legislation.
In fact, the committee ignores the recent stealth expansion of
the
FBI’s power to seize records of dealers in precious metals, jewelers,
and
pawnshops without a warrant issued by an independent judge.
Instead of serving as cheerleaders for the
financial police
state, the committee should act to curtail the federal government’s
ability to
monitor the financial affairs of law-abiding Americans.
2004 Ron Paul 7:6
While the committee’s “Views and Estimates” devote
considerable space to discussing Government Sponsored Enterprises
(GSEs), it
makes no mention of the billions of dollars in subsidies Congress has
given to
GSEs. These subsidies distort the market, create a short-term boom in
housing,
and endanger the economy by allowing GSEs to attract capital they could
not
attract under pure market conditions.
2004 Ron Paul 7:7
Like all artificially created bubbles, the boom in housing
prices cannot last forever. When housing prices fall, the financial
losses
suffered by the mortgage debt holders will be greater than they would
have been
had the government not actively encouraged over-investment in housing.
2004 Ron Paul 7:8
Government subsidies helped Fannie and Freddie triple their
debt to more than $2.2 trillion from 1995 to 2002. Fannie and Freddie’s
combined debt soon could surpass the privately held debt of the entire
federal
government. A taxpayer bailout of the GSEs would dwarf the
savings-and-loan
bailout of the early nineties and could run up the national debt to
unmanageable
levels.
2004 Ron Paul 7:9
However, according to the Committee on Financial Services,
the problem with GSEs is not taxpayer subsidizes but a lack of proper
regulation! Therefore, the only GSE reform recommended by this document
is to
create a new regulator to oversee GSEs. In fact, new regulators, or new
regulations, will not do anything to correct the market distortions
caused by
government support of GSEs.
2004 Ron Paul 7:10
Instead of reorganizing the deck chairs of the GSEs’
looming fiscal Titanic, the Committee should pass HR 3071, the Free
Housing
Market Enhancement Act. This act repeals government subsidies for the
housing-related GSEs — Fannie Mae, Freddie Mac, and the National Home
Loan Bank
Board.
2004 Ron Paul 7:11
The committee’s inconsistency regarding deficit reduction
is shown by its support for increased spending for almost every foreign
aid
program under its jurisdiction. Of course, Congress has neither
constitutional
nor moral authority to take money from the American people and send it
overseas.
Furthermore, foreign aid rarely helps improve the standard of living
for
citizens of “beneficiary” countries. Instead, the aid all too often
enriches
corrupt politicians and helps stave off pressure for real reform.
Furthermore,
certain proposals the committee embraces smack of economic imperialism,
suggesting that a country whose economic and other policies please
American
politicians and bureaucrats will be rewarded with money stolen from the
American
taxpayer.
2004 Ron Paul 7:12
The committee also expresses unqualified support for
programs such as the Export-Import Bank (Ex-Im) that use taxpayer
dollars to
subsidize large multinational corporations.
Ex-Im exists to subsidize large corporations that are quite
capable of
paying the costs of their own export programs! Ex-Im also provides
taxpayer
funding for export programs that would never obtain funding in the
private
market. As Austrian economists Ludwig Von Mises and F.A. Hayek
demonstrated, one
of the purposes of the market is to determine the highest value uses of
resources. Thus, the failure of a project to receive funding through
the free
market means the resources that could have gone to that project have a
higher-valued use. Government programs that take funds from the private
sector
and use them to fund projects that cannot obtain market funding reduce
economic
efficiency and decrease living standards.
Yet,
Ex-Im actually brags about its support for projects rejected by the
market!
2004 Ron Paul 7:13
Rather than embracing an agenda of expanded statism, I hope
my colleagues will work to
reduce
government interference in the market that only benefits the
politically
powerful. For example, the committee could take a major step toward
ending
corporate welfare by holding hearings and a mark-up on my legislation
to
withdraw the United States from the Bretton Woods Agreement and end
taxpayer
support for the International Monetary Fund.
If the committee is not going to defund programs such as Ex-Im,
it should
at least act on legislation Mr. Sanders will introduce denying
corporate welfare
to industries that move a substantial portion of their workforce
overseas. It is
obscene to force working Americans to subsidize their foreign
competitors.
2004 Ron Paul 7:14
Finally, the committee’s views support expanding the
domestic welfare state in the area of housing, despite the fact that
federal
subsidies distort the housing market by taking capital that could be
better used
elsewhere and applying it to housing at the direction of politicians
and
bureaucrats. Housing subsidies also violate the constitutional
prohibitions
against redistributionism. The federal government has no constitutional
authority to abuse its taxing power to fund programs that reshape the
housing
market to the liking of politicians and bureaucrats.
2004 Ron Paul 7:15
Perhaps the most disappointing omission from the
committee’s “Views and Estimates” is the failure to address monetary
policy. This is especially so given the recent decline in the value of
the
dollar caused by the Federal Reserve’s continuing boom and bust
monetary
policy.
2004 Ron Paul 7:16
It is long past time for Congress to examine seriously the
need to reform the fiat currency system.
The
committee also should examine how Federal Reserve policies encourage
excessive
public and private sector debt, and the threat that debt poses to the
long-term
health of the American economy. Additionally, the committee should
examine how
the American government and economy would be affected if the dollar
lost its
privileged status as the world’s reserve currency. After all, the main
reason
the United States government is able to run such large deficits without
suffering hyperinflation is the willingness of foreign investors to
hold US debt
instruments. If, or when, the dollar’s weakness causes foreigners to
become
reluctant to invest in US debt instruments, the results could be
cataclysmic for
our economy.
2004 Ron Paul 7:17
In conclusion, the “Views and Estimates” report
presented by the committee claims to endorse fiscal responsibility, yet
also
supports expanding international, corporate, and domestic spending. The
report
also endorses increasing the power of the federal police state. Perhaps
most
disturbingly, this document ignores the looming economic problems
created by the
Federal Reserve’s inflationary monetary polices and the resulting
increase in
private and public sector debt. I therefore urge my colleagues to
reject this
document and instead embrace an agenda of ending corporate welfare,
protecting
financial privacy, and reforming the fiat money system that is the root
cause of
America’s economic instability.
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