Since 2006, when the latter was named as the chairman of the Federal Reserve system, the former – the libertarian congressman from Texas – has been haranguing Mr. Bernanke during his annual visits to the House Committee on Financial Services.
But with Mr. Paul retiring after this term, Wednesday marked the final chapter of six years of Paul-Bernanke combat. Their engagements have often been the stuff of Internet lore.
Paul-Bernanke matches “certainly made the hearings more interesting – and provided several memorable YouTube moments,” said Rep. Spencer Bachus (R) of Alabama, the chairman of the House Committee on Financial Services at the top of the hearing.
The script usually goes like this: Paul launches into a lecture about Austrian economics for somewhere near half of his allotted time, followed by a perfunctory question to Bernanke. Bernanke answers succinctly, often with a slim smile. Paul then fires off several other questions which Bernanke deflects with a mix of concision and respectful disagreement.
Wednesday wasn’t much different – but it dropped a curtain on a poignant, long-running episode of a broader battle within the GOP on fiscal and monetary priorities.
On one side of that divide stands Bernanke, a Republican and economist with technocratic bona fides after being thrice nominated by President George W. Bush to various posts, including his current spot, before being reappointed by President Obama. On the other is Paul, the leading light for the Republican Party’s disaffected libertarian cohort who see the Bernanke years, including bank bailouts and rock-bottom interest rates for years on end, as not distasteful necessities but deep betrayals of conservative financial principles.
Many on the Financial Services Committee were in a reflective mood early in Wednesday’s hearing – including Paul.
“I have over the years obviously been critical about what goes on in monetary policy, but it hasn’t been so much the chairman of the Federal Reserve, whether it was Paul Volcker or Alan Greenspan or the current chairman, it’s always been the system,” Paul said. “I think they have a job that they can’t do because it’s an unmanageable job, it’s a fallacy, it’s a flawed system, and therefore we shouldn’t expect good results.
Burnished by double a member’s usual time allotment – fellow libertarian Rep. Walter Jones (R) of North Carolina gave up his time so Paul could speak at greater length – Paul uncorked one of his standard diatribes about the Federal Reserve’s secret deliberations over monetary moves.
The argument has particular weight this week, as the House is set to take up (and likely pass) next week Paul’s bill to force the Federal Reserve to reveal more about its deliberations over monetary policy moves.
“Whose responsibility is it under the Constitution to manage monetary policy?” he asked.
“Congress has the authority and it's delegated to the Federal Reserve. That’s a policy decision that you’ve made,” Bernanke replied.
Paul was unimpressed.
“But [Congress] can’t transfer authority. You can’t amend the Constitution by just by saying ‘We’re going to create some secret group of individuals and banks.’ That’s amending the Constitution. You can’t do that, and then all of a sudden allow this to exist in secrecy,” Paul fumed.
Bernanke parried by saying Congress has given that authority and they could decide to take it away. He wouldn’t recommend it, as he argued independent central banks have delivered better economic results than nonindependent ones. But Congress could do so.
“Congress ought to get a backbone, we have a right to know, we have an obligation to defend our currency,” he said.
And that launched a soliloquy that was picture-perfect Paul.
“It’s the destruction of the currency that destroys the middle class. There’s a principle of free market thinking that says destroying the value of the currency through inflation, you transfer the wealth from the middle class and it gravitates to the very wealth. The bankers, the government, the politicians – they all love this. It is the fact that the Federal Reserve is the facilitator. If you like big government, love the Fed. They can finance the wars and all the welfare you want ... but your country ends up in a crisis. It’s a solvency crisis, and it can’t be solved by printing a whole lot of money,” he concluded.
Paul, whose warnings about debt, deficits, and inflation have been his calling card during some 20 years in public service, later offered another line of argument that could stand in as an essential statement of his critics during his time in Congress.
“We’re in deep doldrums and we never change policy. We never challenge anything. We just keep doing the same thing. Congress keeps spending the money, welfare expands exponentially, wars never end, and deficits don’t matter,” Paul said.
And what did Bernanke say to that? Nothing, directly. Paul had gobbled up all of his available time. Only when Rep. Barney Frank (D) of Massachusetts asked for a moment for Bernanke to respond did he get a word in to defend the Fed’s current procedures.
“So far my views have not prevailed,” Paul later said, “but I have appreciated this opportunity to have served on the [financial services] committee.”