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Author Robert Auerbach & Ron Paul Respond to Bernanke's "Bizarre" Accusation in Congressional Record

Ron Paul: 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."

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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, 2003, 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 Arthur 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.

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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.

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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.


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Big Money, Big Secrets

You know the deal. When unaudited authorities have this kind of power they WILL ALWAYS abuse it.

Would it surprise you to know that the solution for GLOBAL WARMING and PEAK OIL are the same? RATIONING. . . plain and simple. Think about it.



progress???? softball game ..still

until ron paul opens up hearings we must conclude that this entire episode is theatre...

Bernanke is "Bizarre" .........

When did it become bizarre to tell the truth. Ron Paul drops truth on everyone and many hate him for it. Sad that people choose to defend things they know are wrong.

Hey....if any of you are on Facebook....hit me up. I want to be your friend.


15 minutes into the movie

15 minutes into the movie fabled enemies intelligence agents talk about how they had been following the money trail for 911 before it happend. they said'very powerful banks in the united states. these banks knew this money was being laundered'. Makes me wonder if it is the same kind of thing as what ron paul spoke of.

ron_paul-bot_12413's picture

Hello fellow Daily Paul'ers....

....we have this story on Digg(submitted by qwikk) yet there are only 12 Digg's. How is that possible? Last night there were 120 users and 200+ guests at the DP. Have we lost our purpose? How can we expect anyone at the Digg nation to look at this when there are only 12 Digg's and one comment? Let's do better....we have to do better....no one is going to do it for us. Thank you for reading and please go Digg this and leave a comment so when can get this puppy on the front page. I know....I know....Digg has buried our stuff in the past, but I for one am not going to let them beat us.

"Guard against the impostures of pretended patriotism."

-George Washington

ron_paul-bot_12413's picture

Only 17 Digg's....

.....and one comment? Let's all Digg this story! This is our responsibility.....Ron Paul put the story out there.....it's our responsibility to spread this information. Please.....Digg and comment.

"Guard against the impostures of pretended patriotism."

-George Washington

ron_paul-bot_12413's picture

Scroll down.....sorry.....it would have been helpful....

....to re-post the link. Here it is.


"Guard against the impostures of pretended patriotism."

-George Washington


Michael, this post of Dr. Paul's reading of Auerbach's letter, entering it into the Congressional record, is massively full of win. They may have to rename the 1976 movie, "All The Fed's Men."

One little correction you might want to make in your OP, though: five days after the break in would have been June 22, 1972, as reflected in the record of Dr. Paul's House floor presentation, not June 22, 2003, as written in your post.

Great response

This is a great response. When Someone calls you bizarre it is best to respond by having more class and showing your reason and intellect. Who is Gonzalez?

-A former liberal for Ron Paul.

Alot of people think this Federal Reserve stuff is "kooky".

Maybe it's best if we just don't talk about it anymore.
We need to get elected, you know?

Having positions and thoughts might be considered "wacko".
Look, right there in that article, they're already calling RP's statements "bizarre".
How much more do you need?
Next, Glenn Beck will be saying we're crazy conspiracy theorists, and that's "political suicide" from what I hear around here.

Your suggestion plays right

Your suggestion plays right into their hands. That is exactly how they control the masses. Glenn Beck is a tool. I predict he and others will pay dearly some day for their part in the biggest theft in world history. It may take the collapse of the dollar for it to happen but it will happen.

Charles Wilson...

I agree with your comment. I will be damned if I will allow myself or fellow dp'ers to fall prey to ignorance regarding Glen Beck. Glen Beck is a tool, and is also lying to all these Tea Partying going folks just to suck them into the NEO-CON agenda.


That did help.

And perhaps it will also help others to see that avoiding tough issues, for the sake of perceived political pragmatism is simply playing right into their hands, on ALL of those tough issues which they try to marginalize us with.

I almost fell prey to it, because I've been reading so many comments on DP lately, that we should just avoid certain topics and pretend they don't exist, under the false premise that it will produce political gains. And your explanation about how they are actually controlling the debate(and us) wth this insidious method was very instructive for me.

I think I'm seeing much more clearly now.
I wonder if anyone else is.


I have been trying to slow down the train wreck for weeks.

If I disappear from a discussion please forgive me. My 24-7 business requires me to split mid-sentence to serve them. I am not ducking out, I will be back later to catch up.

Maybe we should take a different angle on the Federal Reserve...

Maybe we should write Obama, and ask him why he is not persuing transparency with the Federal Reserve, and why he has not pushed to get HR1207 through? Let's all write him a nice letter, and ask him what happened to all the transparency he promised the American people during his campaigning. What do you all think?

I would Hope

all of the Obama supporters were doing that already!

Change? What Change!

Good idea though...


exactly...you are right, and there are quite a few Obama supporters that are waking up...


I wonder if Bernakie will answer? Who got to keep all of these hundred dollar bills? My guess Wall Street- in a round about way- just to make it look legal.

Government is supposed to protect our freedom, our property, our privacy, not invade it. Ron Paul 2007

One thing I can say regarding human nature....

and Bernanke, he will never admit to anything with the Federal Reserve that was wrong, or bad for our country. You all know that already, this man is bought and paid for, and is just another puppet, and is no different than any of the other fools in D.C. that are given marching orders by their masters.

ron_paul-bot_12413's picture

Here's the Digg link..

....submitted by "qwikk"(thank you bTW).


"Guard against the impostures of pretended patriotism."

-George Washington

Thanks for posting the digg

I'm Digg #10!!


C4L Audit The FED Now Petition


Ben Bernanke's reconfirmation hearings ignited a grassroots UPROAR, and now many senators are second-guessing their Fed support.

That’s why right now may be our best shot at FORCING a public, roll call vote on AUDIT THE FED in the U.S. Senate, putting every U.S. Senator on record for or against Fed secrecy.

Unfortunately, the Fed lobbyists are now working double-time to reclaim their stranglehold on the Senate. That's why we must fight back hard to defeat their anti-transparency lobbying campaign.

ron_paul-bot_12413's picture

Thanks for the link...

.....I signed it.

"Guard against the impostures of pretended patriotism."

-George Washington

We need to link to this!

on all of the stories making fun...

Check out http://iroots.org/
"If you’re into political activism, at least for Ron Paul if not for anyone else, I strongly recommend spending some time with iroots.org." - Tom Woods

how can the federal reserve chairman deny this?


he believes what is necessary for him to believe or professes to believe--

sad, really.

it's hard to be awake; it's easier to dream--

Although I'm sure the

Although I'm sure the accusations are correct, why would Bernanke be privy to that information? He's certainly not clairvoyant, nor does he display any sensitivity to the negative historical record of the Fed.

Well, at least Ron Paul

still has enough guts to stand up to being called "kooky" and speak the truth.

We could use some more candidates like him.