Not linked on Ron Paul’s Congressional Website.
(Mr. PAUL asked and was given permission
to revise and extend his remarks.)
2009 Ron Paul 8:1
Mr. PAUL. Although I recognize the
chairman of the committee’s points
that this literally is not the appropriation,
I rise in opposition to the bill, but
I do want to speak out against this
whole process of what we are trying to
do with the bailout, not only this time
but the time before. It is a system that
has brought this country to its knees,
and I think we haven’t recognized what
the cause has been, and therefore,
we’re not looking at this problem in
the proper manner in order to solve the
problem.
2009 Ron Paul 8:2
There has been a lot of money involved
and a lot of money spent. There
have been appropriations that we’ve
made here in the Congress as well as
the trillions of dollars the Federal Reserve
has used to try to bail out the financial
industry, and nothing seems to
be working.
2009 Ron Paul 8:3
I think it’s mainly because we
haven’t recognized nor have we admitted
that excessive spending can cause
financial problems. Excessive debt can
cause some problems. Inflation – that
is, the creation of new money and credit
out of thin air – can cause a lot of
problems, and we’ve been doing it for
decades. It was predictable. It was not
a surprise that we got ourselves into a
financial mess because of a system that
is deeply flawed.
2009 Ron Paul 8:4
So what do we have? What have we
been doing now for the last 6 months to
a year?
We have been spending more. We
have been running up debt like we’ve
never run up debt before, and we’re
printing money like we never have before.
We think that is going to solve
the problem. That literally has been
the cause: too much spending, too
much borrowing and too much inflation.
2009 Ron Paul 8:5
I do want to address the subject more
specifically about moral hazard and
why the system was so deeply flawed.
That is, when a Federal Reserve system
and a central bank create easy
money and easy credit and they have
interest rates lower than they should
be, businesspeople do the wrong things.
They make mistakes. It’s called
malinvestments, and we’ve been doing
it for a long time. It causes financial
bubbles, and they have to be corrected.
2009 Ron Paul 8:6
Actually, the recession is therapy for
all of the mistakes, but the mistakes
come, basically, from a Federal Reserve
system that’s causing too many
people to make mistakes. It causes savers
to make mistakes. Interest rates
are lower than they should be, so they
don’t save. In capitalism, capital
comes from savings, but for decades
now, capital has come from the printing
press, and nobody has saved.
2009 Ron Paul 8:7
That contributes to what we call
“moral hazard” as well as the system
of the Fannie Mae and Freddie Mac
system. It always had a line of credit.
It never had to use it, but the assumption
was, if we ever got into any trouble,
the Treasury would be there, and
the Federal Reserve would back them
up. That existed for a long time, causing
specifically the housing bubble to
develop.
2009 Ron Paul 8:8
Then we subsidized the insurance.
The government-subsidized insurance
program further promoted the principle
of moral hazard – people doing
things, spending money and investing
in the incorrect way.
2009 Ron Paul 8:9
Then with the assumption that we’re
all going to be bailed out, which we’re
endorsing by bailing everybody out,
people say, “Well, no sweat because, if
there is a mistake, the government will
come to our rescue.” That’s part of the
system of the FDIC. Now, nobody can
conceive of the notion that we could
live without an FDIC, but the truth is
that a private FDIC would never permit
this massive malinvestment. There
would be regulations done in the marketplace,
and there would not be this
distortion that we’ve ended up with.
2009 Ron Paul 8:10
So this bill actually makes it permanent
that the insurance will be $250,000
per depositor. Now you say, on the
short run, that’s pretty good because
that conveys confidence to the system
because at least we know that our deposits
are secure. This is true. It helps
in the short run, and generally, this is
the way we work here. We always say,
On the short run, this is going to be a
benefit. On the short run, the bailout
will help. On the short run, we will do
“this.” Actually, on the short run,
there is a great deal of harm that’s
done. As a matter of fact, today, the
long run is here.
