| Madame
Speaker, I would like to enter into the record the following letter
from Professor Robert D. Auerbach, a professor at the LBJ School of
Public Affairs at the University of Texas. This letter provides
additional information regarding remarks I made at yesterday's Financial
Services Committee Humphrey-Hawkins hearing, remarks which Federal
Reserve Chairman Bernanke categorized as “bizarre.” Thank you Congressman Ron Paul for bringing these important facts to the public's attention I
thank Congressman Ron Paul for bringing to the public’s attention the
Federal Reserve coverup of the source of the Watergate burglars’ source
of funding and the defective audit by the Federal Reserve of the bank
that transferred $5.5 billion from the U.S. government to Saddam Hussein
in the 1980s. Congressman Paul directed these comments to Federal
Reserve Chairman Ben Bernanke at the House Financial Services Hearing
February 24, 2010. I question Chairman Bernanke’s dismissive response. BERNANKE:
“Well, Congressman, these specific allegations you've made I think are
absolutely bizarre, and I have absolutely no knowledge of anything
remotely like what you just described.”
The evidence Congressman Ron Paul mentioned is well documented in my
recent book, Deception and Abuse at the Fed (University of Texas Press:
2008). The head of the Federal Reserve bureaucracy should become
familiar with its dismal practices. First, consider the
Fed’s coverup of the source of the $6300 in hundred dollar bills found
on the Watergate burglars when they were arrested at approximately 2:30
A.M. on June 17, 1972 after they had broken into the Watergate offices
of the Democratic Party. Five days after the break-in, June 22,
1972, at a board of directors’ meeting of officials at the Philadelphia
Fed Bank, it was recorded in the minutes [shown on page 23 of my book]
that false or misleading information had been provided to a reporter
from the Washington Post about the $6,300. Bob Woodward told me he
thought he was the Washington Post reporter who had made the phone
inquiry. The reporter "had called to verify a rumor that these
bills were stolen from this Bank" according to the Philadelphia Fed
minutes. The Philadelphia Fed Bank had informed the Board on June 20
that the notes were "shipped from the Reserve Bank to Girard Trust
Company in Philadelphia on April 3, 1972." The Washington Post was
incorrectly informed of "thefts but told they involved old bills that
were ready for destruction." The Federal Reserve under the
chairmanship of Author Burns not only kept the Fed from getting
entangled in the Watergate coverup, which the Fed’s actions had
assisted, it allowed false statements about bills the Fed knew were
issued by the Philadelphia Fed Bank to stand uncorrected. Blocking
information from the Senate and House Banking Committees [letters shown
in my book, Chapter 2] and issuing false information during a perilous
government crisis imposed huge costs on the public that had insufficient
information to hold the Fed officials accountable for what they had
withheld from the Congress. Had the deception been discovered the
Fed chairmen following Burns may have been forced to rapidly implement
some real transparency to restore the Fed’s credibility. That would have
reduced or eliminated many of the lies, deceptions, and corrupt
practices that are described in my book. The second subject brought
up by Congressman Ron Paul is the exposure of faulty examinations of
the Federal Reserve of a foreign bank in Atlanta, Georgia through which
$5.5 billion was sent to Saddam Hussein that a Federal Judge found to be
part of United States active support for Iraq in the 1980s. On
November 9, 1993, several federal marshals brought a prisoner,
Christopher Drogoul, into my office at the Rayburn House Office Building
of the U.S. House of Representatives. The marshals removed the
manacles. Drogoul took off his jump suit and changed into a shirt, tie,
and business suit. He immediately looked like the manager of the Atlanta
agency with domestic headquarters in New York City of Banca Nazionale.
Drogoul had come to testify about a “scheme prosecutors said he
masterminded that funneled $5.5 billion in loans to Iraq’s Hussein
through BNL’s Atlanta operation. Some of the loans allegedly were used
to build up Iraq’s military and nuclear arsenals in the years preceding
the first Gulf War.” 1 Drogoul’s “’off book’ BNL-Atlanta funding to
Iraq began in 1986 as financing for products under Department of
Agriculture programs.”2 The loans allegedly had been authorized by the
U.S. Department of Agriculture. Since Drogoul told the committee he was
merely a tool in an ambitious scheme by the United States, Italy,
Britain and Germany to secretly arm Iraq in their 1980-88 war, the
testimony was politically contentious and unproven. He was sentenced in
November 1993 to 37 months in prison and he had already served 20 months
awaiting his sentencing hearing. U.S. District Judge Ernest
Tidwell found that the United States had actively supported Iraq in the
1980s by providing it with government-guaranteed loans even though it
wasn’t creditworthy. The judge said such policies “clearly
facilitated criminal conduct.”3 Gonzalez was drawn to Drogoul’s
answer about the Fed examiner who had visited his Atlanta operation.
Gonzalez said that: “At the November 9, 1993 Banking Committee
hearing I asked Christopher Drogoul, the convicted official of the
Banca Nazionale Del Lavoro agency branch in Atlanta, Georgia, how
the Federal Reserve Bank examiners could miss billions of dollars
of illegal loans, most of which ended up in the hands of Hussein. Mr.
Drogoul stated: The task of the Fed [bank examiner] was simply to
confirm that the State of Georgia audit revealed no major
problems. And thus, their audit of BNL usually consisted of a one
or two-day review of the state of Georgia’s preliminary results,
followed by a cup of espresso in the manager’s
office.” Gonzalez was appalled at the of lack of effective
examination of a little storefront bank and also appalled by the
gifts exchanged by officers of the New York Federal Reserve and the
regulated banks in New York City where the main U.S. office of BNL was
located. A description of what followed is in my book. The
Fed voted in 1995 to destroy the source transcripts of its policy making
committee that had been sent to National Archives and Records
Administration. Chairman Alan Greenspan had the committee vote on
this destruction, telling the members: “I am not going to record these
votes because we do not have to. There is no legal requirement.” (p. 104
in my book.) Greenspan thus removed any fingerprints on this act of
record destruction. Donald Kohn, who is now Vice Chairman of the
Board of Governors at the Federal Reserve, answered some questions I had
sent to Chairman Greenspan about this destruction. Kohn replied
in a letter on November 1, 2001 to me at the University of Texas
that they had destroyed the source records for 1994, 1995 and 1996, they
did not believe it to be illegal and there was no plan to end this
practice. That is one reason why the Federal Reserve audit
supported by Congressman Ron Paul is needed. The Fed must stop
destroying its records. Robert Auerbach
is Professor of Public Affairs at the Lyndon Baines Johnson School of
Public Affairs, The University of Texas at Austin. He was an
economist with the House of Representatives Financial Services Committee
during the tenure of four Federal Reserve Chairmen: Arthur Burns,
William Miller, Paul Volcker, and Alan Greenspan. Auerbach also served
as an economist in the U.S. Treasury's Office of Domestic Monetary
Affairs during the first year of the Ronald Reagan administration and as
a financial economist with the U.S. Federal Reserve System. Auerbach
has been a professor of economics at the American University in
Washington, D.C. (1976-83), and a professor of economics and finance at
the University of California-Riverside (1983-93). He has written
numerous articles, and two textbooks in banking and financial markets.
He received two Masters degrees in economics, one from the University of
Chicago and one from Roosevelt University, where he studied under Abba
Lerner, and a Ph.D. in economics from the University of Chicago, where
he studied under Milton Friedman. 1 Marcy Gordon, “Banker Imprisoned in BNL Case Tells Story to House Committee,” The Associated Press, November 9, 1993. 2
U.S. Newswire: “Former Executive of Atlanta Agency of Italian-Owned
Bank Pleads Guilty to Conspiracy”, from U.S. Department of Justice,
Public Affairs, June 2, 1992. 3 Peter
Mantius, “Drogoul given 37 months Judge in BNL case also blasts actions
of U.S. prosecutors,” The Atlanta Journal and Constitution, December 10,
1993, Section A, p. 12. | |
